Egypt: Central Bank of Egypt holds fire again in September
At its meeting on 5 September, the Monetary Policy Committee of the Central Bank of Egypt (CBE) decided to keep the overnight deposit, overnight lending, main operations, and discount rates unchanged at their respective all-time highs of 27.25%, 28.25%, 27.75% and 27.75%. The hold was the third in a row, and followed a cumulative increase of 1,900 basis points since March 2022 and was largely priced in by markets.
The decision to maintain interest rates was largely a cautious one. On the one hand, inflation has been on a downward trajectory over the past five months, despite remaining notably above target; moreover, GDP growth waned slightly in January–March from the prior three months due to disruptions to the Red Sea trade route, suggesting that the economy could benefit from monetary policy easing. That said, the CBE deemed risks to the inflationary outlook to be skewed to the upside and said that before lowering rates it wants to assess, particularly, the impact of the government’s fiscal consolidation measures—namely the withdrawal of a range of subsidies as part of the IMF financing deal—on inflation.
The Central Bank of Egypt provided no explicit forward guidance. Instead, it reiterated that the path of future policy rates would be determined by inflation expectations rather than prevailing price pressures. The next meeting is set for 17 October. Slightly over half of our panelists expect rate cuts by the end of this calendar year, with a range of 100–200 basis points of reductions projected. Slightly under half of panelists expect no cuts.