The Central Bank Reveals Reasons for Inflation Decline in June: Drop in Food Prices Takes the Lead

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The Central Bank of Egypt (CBE) has revealed the reasons behind the decline in the annual urban headline inflation rate during June 2026, noting that the rate dropped to 14.3%, compared to 14.6% in May 2026.

In its monthly report, the CBE explained that this decline is primarily attributed to the slowdown in food inflation, which fell to 5.4% in June 2026 compared to 7.6% in May. This mitigated previous seasonal spikes in the prices of core food items, fresh vegetables, and fruits. Conversely, non-food inflation recorded a slight increase during June, driven primarily by rising prices in the services group.

Decline in Monthly Inflation

The monthly urban headline inflation rate recorded -0.4% during June 2026, compared to -0.1% in June 2025 and 1.6% in May 2026.
The CBE attributed this monthly decline to falling food prices. Both core food inflation and fresh vegetables and fruits inflation recorded rates below their historical averages. This was driven by lower prices for poultry, table eggs, and fresh vegetables, which outweighed the impact of higher non-food inflation resulting from rent increases and seasonal spikes in Hajj and Umrah trip prices.

Core Inflation

The annual core inflation rate increased to 14.3% in June 2026, up from 13.8% in May, due to the unfavorable base year effect.
Meanwhile, the monthly core inflation rate slowed to 0.3% in June, compared to -0.2% in June 2025 and 1.6% in May 2026. The CBE noted that the rise in monthly core inflation was due to the contribution of the services group, which exceeded the impact of declining core food prices.

Inflation Decline in Rural Areas and Nationwide

The annual headline inflation rate in rural areas declined to 10.1% in June 2026, compared to 11.4% in May.
The annual headline inflation rate for the entire republic, which reflects the average of urban and rural inflation, also slowed to 12.2%, down from 13% in May.

Drop in Food Prices

The monthly food inflation rate recorded -3.2% in June 2026, contributing approximately -1.19 percentage points to the monthly headline inflation.
This decline was driven by an 8.7% drop in the fresh vegetables and fruits group, contributing -0.61 percentage points to monthly inflation. This reflects the seasonal decline in vegetable prices, which fell by 14.2%, while fresh fruit prices rose slightly by 1.3%, aligning with regular seasonal patterns.
Core food prices also dropped by -2.1% during June, contributing -0.58 percentage points to monthly inflation, marking the largest monthly decline since May 2024. The CBE noted this deviated from the usual seasonal pattern due to significant drops in the prices of poultry (-12.5%) and table eggs (-10.3%).

Rise in Services Prices

In contrast, the monthly non-food inflation rate recorded 1.3% during June, contributing 0.79 percentage points to monthly inflation.
Prices in the services group rose by 2.1% in June, contributing 0.62 percentage points. This was driven by rent increases following the continued effects of amendments to the old rent law, alongside higher prices for Hajj and Umrah trips and increased spending at restaurants and cafes.
Consumer goods prices increased by 1.1%, contributing 0.15 percentage points, due to higher prices for household cleaning products, clothing, footwear, and personal care products.
Regulated goods and services recorded a monthly inflation rate of 0.1%, contributing 0.03 percentage points to headline inflation.

Contribution of Core Inflation Components

The monthly core inflation rate stood at 0.3% in June, with components contributing as follows:

Services: 0.86 percentage points.
Consumer Goods: 0.21 percentage points.
Core Food Items: -0.81 percentage points.

Slowdown in Annual Food Inflation

The annual food inflation rate slowed to 5.4% in June from 7.6% in May, contributing 2.09 percentage points to annual headline inflation.
This resulted from a drop in fresh vegetables and fruits inflation to 16.9% in June versus 25.8% in May, contributing 1.07 percentage points. This reflects the continued year-on-year decline in fresh fruit prices and a slower pace of vegetable price increases compared to June 2025.
Core food inflation dropped to 3.4% compared to 4.4% in May, contributing 1.03 percentage points, due to lower poultry and table egg prices compared to the same month last year.

Non-Food Items Continue to Exert Pressure

The annual non-food inflation rate rose to 19.9% in June against 19.1% in May, contributing 12.21 percentage points to headline inflation.
Services inflation hit 27.5%, contributing 7.50 percentage points, driven by higher rents, Hajj and Umrah trip costs, and restaurant/cafe spending.
Regulated items inflation reached 13.7%, contributing 2.95 percentage points, due to annual increases in tobacco prices and public transport fares.
Consumer goods inflation recorded 12.1% in June, contributing 1.76 percentage points, driven by higher prices for clothing, personal care products, household cleaners, and cars.
The CBE confirmed that the annual core inflation rate reached 14.3% during June 2026. Services contributed 10.39 percentage points, consumer goods contributed 2.45 percentage points, while core food items contributed 1.42 percentage points to the annual core inflation.