Egypt: Central Bank stands pat in March
The Central Bank of Egypt (CBE) left all interest rates unchanged at its monetary policy meeting on 28 March. Therefore, the overnight deposit rate remains at 15.75%, the overnight lending rate at 16.75% and the main operation rate at 16.25%. This comes after the CBE cut all rates by one percentage point on 14 February on the back of a slowing inflation trend and weakening global economic momentum. Most market analysts had expected a further interest rate cut in March.
The CBE likely felt it did not have room to cut rates in such quick succession given that, after slowing to 12.0% in December, inflation steadily crept up to 14.4% in February, leaving it outside of the CBE’s target range of 6.0% to 12.0%. With the Islamic month of Ramadan starting in May, food price inflation could face more upward pressure in the short-term. In addition, emerging market currency volatility picked up recently with local elections being held in Turkey on 31 March. This may have spooked the CBE into taking a more cautious policy approach.
Looking ahead, the Central Bank of Egypt is likely to maintain its accommodative monetary policy stance in the short-term to continue supporting economic activity. The CBE said it would keep a close eye on developments, particularly the inflation trajectory, and noted that it would “not hesitate to adjust its stance to achieve its mandate of price stability over the medium term”.
The next monetary policy meeting is scheduled for 23 May.