Egypt: Central Bank of Egypt holds fire again in July
At its meeting on 18 July, the Monetary Policy Committee of the Central Bank of Egypt (CBE) decided to leave the overnight deposit, overnight lending, main operations, and discount rates unchanged at 27.25%, 28.25%, 27.75% and 27.75%, respectively. The hold mirrored May’s decision, which followed a cumulative increase of 1,900 basis points since March 2022 and met market expectations.
The CBE’s hold was driven by persistent upside risks to the disinflation process, including worsening geopolitical tensions and extreme weather events. Moreover, while both headline and core inflation have continued to wane in recent months, they remain notably above the Central Bank’s 5.0–9.0% target band. Accordingly, the CBE deemed a continuation of its restrictive policy stance necessary. With the rate at its current level, the Bank expects a steep drop in inflation in January–June 2025.
Regarding activity, the CBE released national accounts estimates: Annual GDP growth inched down to 2.2% in January–March 2024 from 2.3% in the prior three months—marking an over-three-year low. Meanwhile, high-frequency data signaled still-subdued economic conditions in April–June.
The Central Bank of Egypt provided no explicit forward guidance. Instead, it stated that the path of future policy rates will be determined by inflation expectations, rather than historical data. The CBE emphasized its readiness to adjust its policy stance to ensure a sustained decline in underlying inflation and maintain price stability over the medium term. The next meeting is set for 5 September. Half of our panelists expect rates to end 2024 at their current level, but our Consensus is for a small cut before the end of the year.