Central Bank of Egypt holds fire in February

Seventh consecutive hold had been anticipated: At its first meeting of 2025 on 20 February, the Monetary Policy Committee of the Central Bank of Egypt (CBE) stayed put again, leaving the overnight deposit, overnight lending and the main operations rates unchanged at their respective record highs of 27.25%, 28.25% and 27.75%. The hold, which was the seventh consecutive, had been priced in by markets and followed a cumulative hike of 1,900 basis points since March 2022.

CBE errs on the side of caution as upside inflation risks rise: The decision to hold interest rates was driven by a slower pace in the moderation of headline inflation in the second half of 2024, during which period underlying price pressures were largely stable. Moreover, the CBE noted upside risks to the inflationary outlook have risen since its last meeting in November 2024. Turning to activity, the CBE stated GDP growth seemingly accelerated in October–December 2024 from the prior three months, and the unemployment rate declined, giving the Bank room to keep rates at record highs to drive disinflation and anchor inflation expectations.

Forward guidance remains open-ended: The Central Bank provided no explicit forward guidance. Our Consensus is for the easing cycle to begin this calendar year 2025, with the CBE to reduce rates by around 800 basis points. The spread between panelists is wide, however, at 200–1,225 basis points worth of reductions. The next meeting is set for 17 April.

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