MPC decides to keep key policy rates unchanged: CBE

CAIRO - 23 May 2024: The Central Bank of Egypt’s (CBE) Monetary Policy Committee (MPC) decided to keep the CBE’s overnight deposit rate, overnight lending rate, and the rate of the main operation unchanged at 27.25 percent, 28.25 percent, and 27.75 percent, respectively.

 

According to the statement, Egypt's real GDP growth slowed to 2.5 percent in the first half of the 2023/24 fiscal year, down from 4.2 percent in the corresponding period of the previous year. This slowdown was primarily attributed to a decline in the manufacturing sector's contribution to economic activity. Leading indicators for the first quarter of 2024 also suggest that overall economic activity remains subdued.

 

“Forecasts indicate that inflation has already peaked and thus, is expected to moderate in 2024, as inflationary pressures begin to subside. A significant decline in inflation is anticipated in H1 2025 due to the impact of recent monetary policy tightening, unification of the foreign exchange market, and favorable base effects. Moreover, sizable foreign direct investment inflows, substantial improvement in external financing conditions, subsequent impact on foreign reserve accumulation, and increasing domestic and foreign demand for Egyptian pound-denominated assets will contribute significantly to price stability,” the CBE report read.

 

The CBE noted that while inflation has decelerated from its peak levels, it remains elevated. The annual headline and core inflation rates stood at 32.5 percent and 31.8 percent, respectively, in April 2024, down from their respective highs of 38.0 percent and 41.0 percent recorded earlier in 2023. The central bank attributed this trend to favorable base effects and the steady unwinding of food inflation, despite a recent unexpected surge in February 2024.

 

Despite these positive projections, the CBE acknowledged the presence of upside risks to the forecasted disinflation path, including escalating geopolitical tensions, unfavorable climate conditions, and higher-than-anticipated fiscal prudence measures. Accordingly, the central bank has affirmed that it will continue to monitor the balance of risks surrounding the inflation outlook closely and will not hesitate to use all available tools to ensure that the policy stance remains sufficiently restrictive to achieve a sustained decline in underlying inflation and safeguard price stability over the medium term.