Egyptian inflation dropped for the third month running in August, the central bank said on Thursday, reaching its lowest level in more than two years and paving the way for rate cuts that could stimulate much-needed investment.
Urban consumer inflation dropped to 7.9 percent in August from 8.4 percent in June, the official statistics agency said on Monday.
The fall was driven by a variety of goods and services, according to data from the state's statistics agency.
Core annual inflation, which excludes items such as fruit and vegetables whose prices fluctuate widely, dropped to 5.61 percent from 6.49 percent, the central bank said.
"Looking ahead, with administered price hikes no longer distorting inflation and global commodity prices set to remain low, we think inflation is likely to stay in single digits for the next 18 months or so," said a Capital Economics research note.
Inflation accelerated after the government slashed fuel subsidies in July 2014, pushing up fuel prices by up to 78 percent.
Lower inflation increases the likelihood that Egypt's central bank will cut key interest rates at a monetary policy meeting scheduled for next week, said Angus Blair, chairman of the business and economic forecasting think-tank Signet.
"(Lower rates would) bring Egypt more in line with global norms … and it would encourage some growth in lending, which would be good for the banking sector and the economy," said Blair. "Companies have to start investing to take economic growth to another level."
The central bank has held rates steady at its past four monetary policy meetings after surprising analysts with a 50 basis point cut in January.
