Central Bank of Egypt extends inflation targets amid steady economic progress
The Central Bank of Egypt (CBE) announced on Thursday an extension to its inflation targets, signaling confidence in the nation’s ongoing economic recovery and stability.
The CBE’s Monetary Policy Committee (MPC), in its last meeting in 2024, set inflation goals of 7 per cent (±2 percentage points) for the fourth quarter of 2026 and 5 per cent (±2 percentage points) for the fourth quarter of 2028. The extension of inflation targets gives the CBE “more room to weather price shocks without requiring further stringent monetary tightening, thereby avoiding substantial slowdown in economic activity.”
This strategic move reflects the CBE’s commitment to gradually adopting a comprehensive inflation-targeting framework while maintaining a balanced approach to economic growth.
Inflation Declines After a Rocky Road
Egypt’s inflation rate, which peaked at 38 per cent in September 2023, has shown consistent improvement, dropping to 25.6 per cent in November 2024. This progress was driven by a sharp decline in food prices, with fresh vegetables and core food items recording their lowest inflation levels in nearly two years.
While food prices eased, regulated increases in fuel, transportation, and tobacco costs reflected the government’s strategy to reduce the fiscal deficit. The annual core inflation rate also fell to 23.7 per cent in November from 24.4 per cent in October, marking a steady downward trajectory.
A Global and Domestic Balancing Act
Egypt’s inflation trends mirror a global pattern of easing price pressures. However, the rate remains above the CBE’s original target due to global disruptions and domestic challenges between 2022 and 2024. These included rising global food prices, imported inflation, capital outflows during the Russia-Ukraine conflict, domestic supply shocks, and fiscal reforms.
In response to these challenges, the central bank implemented bold corrective measures in March 2024, including restrictive monetary policies and the unification of the foreign exchange market. These efforts successfully stabilised inflation expectations and attracted foreign currency inflows, setting the stage for sustained economic recovery.
Projections:
According to the CBE’s projections, inflation will continue its downward trend, potentially reaching single-digit levels by mid-2026.
“Looking ahead, inflation is projected to ease substantially in 2025, as the cumulative impact of monetary policy tightening and favourable base effect materialises, with a notable decline in Q1 2025 and convergence to single digits by H2 2026.”
Attribution: Amwal Al Ghad English
