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Egypt’s inflation eases to 14.1%

Economy

Cairo - Egypt's annual urban consumer price inflation eased to 14.1 percent in September, from an eight-year high of 15.5 percent in August, the official statistics agency CAPMAS said on Monday.

Headline inflation jumped in August, raising expectations that the central bank would hike interest rates on Sept. 22, but the central bank held rates citing transitory factors that pushed up costs.

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A hot air balloon flies over the mortuary temple of Ramsis III at Medinet Habu on the west bank of the Nile River in Luxor, Egypt.

September's fall is the first in the urban measure since March. Inflation has been rising steadily since April and economists expect it to keep rising as Egypt implements an overhaul that includes subsidy cuts and devaluing its pound.

Egypt's President Abdel Fattah al-Sisi is under increasing pressure to revive the economy and curb inflation to avoid a public backlash.

Economists say the pound, maintained at 8.78 per dollar, will have to be devalued before the end of the year, driving up prices further given Egypt's dependence on imported goods.

Egypt has a staff level agreement with the International Monetary Fund over a $12 billion loan programme but still needs final approval from the IMF board.

IMF chief Christine Lagarde said on Saturday that Egypt would have to take action on the exchange rate and subsidies before the board could formally approve the loan.

“Looking ahead, despite September's dip, we expect inflation to rise again soon,” Capital Economics said in a research note on Monday.

“After all, the authorities are edging closer to securing a financing agreement with the IMF and one of the key lending conditions will be a shift to a more flexible exchange rate,” it said, predicting the pound will weaken by around 25 percent against the dollar by end-2017, driving prices up further.

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