Egyptians buy fruits from street vendor at the central of Cairo, Egypt July 24, 2017. Picture taken July 24, 2017. REUTERS/Amr Abdallah Dalsh

CAIRO (Reuters) - Egypt’s key inflation indicators dropped in August from the multi-decade highs they reached in July, when energy prices were raised as part of International Monetary Fund-backed reforms.

Annual urban consumer price inflation dipped to 31.9 percent year-on-year in August from 33.0 percent in July, the official CAPMAS statistics agency said on Sunday. Core inflation, which strips out volatile items like food, decreased to 34.86 percent from 35.26 percent, according to the central bank.

Inflation soared in July to its highest since 1986 after the government cut fuel and energy subsidies. The cuts were a condition of a $12 billion, three-year loan program agreed last November with the IMF, which included subsidy cuts, tax increases and looser capital controls.

“I’d expected this to widen, because usually it takes a couple of months for the subsidy cuts to actually reflect on prices, but this is definitely positive,” said Allen Sandeep, head of research at Naeem Brokerage in Cairo.

Import-dependent Egypt has been rattled by surging inflation after floating its currency last year. Since then, the Egyptian pound has roughly halved in value.

“There has been minimal appreciation of the pound. If it gets a little more sizeable, then we could actually see inflation cooling off even before November,” Sandeep said.

The pound EGP1= traded around 17.65 pounds to the dollar on Sunday. It has strengthened marginally in recent weeks after hovering around 18 pounds just after the currency was floated.

The central bank raised its key interest rates by 200 basis points in a surprise move in July, seeking to ease the inflationary pressure, but has kept them steady since.