URGENT: Egypt c.bank keeps interest rates unchanged
The Central Bank of Egypt (CBE) kept on Thursday key interest rates unchanged for the fourth time in a row and signalled that inflation “remains on a downward trajectory, albeit restrained by the drag of fiscal measures.”
The CBE’s Monetary Policy Committee (MPC) decided to maintain all key rates; the overnight deposit rate, lending rate, and main operation rate, steady at their current levels at 27.25 per cent, 28.25 per cent, and 27.75 per cent, respectively. The discount rate also remained unchanged at 27.75 per cent.
The central bank kept rates steady at its last three meetings, on July 18 and May 23.
Annual headline and core inflation stabilised around 26.4 per cent and 25.0 per cent, respectively in September 2024. Non-food items were the primary drivers of inflation during August and September, reflecting the impact of fiscal measures.
While food inflation has been declining, the CBE said the overall inflationary trend remains downward, supported by improved inflation expectations since the beginning of the year. However, the drag of fiscal measures continues to restrain the pace of disinflation.
On March 6, the central bank hiked rates by 600 basis points (bps) at an all-time high, bringing total hikes since the beginning of the year to 800 bps.
The MPC will hold two more meetings this year, on November 21 and December 26.
Annual urban headline CPI inflation for September 2024 recorded 26.0 per cent compared to 25.6 per cent in August 2024 primarily driven by rising costs of essential goods and services.
“The Committee judges that current policy rates remain appropriate to maintain the prevailing tight monetary stance until a significant and sustained decline in inflation is realised. The MPC will continue to follow a data-driven approach to determine the sufficient level and duration of restriction based on its assessment of the inflation outlook, dynamics of underlying inflation, and strength of monetary policy transmission. The Committee will not hesitate to utilize all tools at its disposal to sustain the disinflation path and ensure price stability in the medium term.”
Forecasts
Looking ahead, the CBE expects inflation to stabilise around current levels through the fourth quarter of 2024 despite the balance of risks being tilted to the upside. “These risks include the persistence of regional tensions, elevated international commodity prices, and higher than anticipated pass-through of fiscal measures.”
Inflation is projected to decline starting in the first quarter based on the anticipated cumulative impact of monetary policy tightening and favourable base effects, “given the lagged effect of monetary policy decisions.”
Attribution: CBE Monetary Policy Committee Statement
