Egypt central bank postpones interest rate decision to May 21 amid IMF debate

Egypt’s central bank decided to postpone its next monetary policy meeting on interest rates until Sunday, May 21, three days later than scheduled, it said in a statement.

It gave no reason for the delay.

On March 30, the central bank kept its key interest rates unchanged at a meeting of its Monetary Policy Committee. It kept its overnight deposit rate at 14.75 percent and its overnight lending rate at 15.75 percent, the fourth consecutive meeting where it kept rates on hold since it aggressively hiked them in November.

The postponement concurs with the International Monetary Fund team’s current visit to Egypt to complete its first review of the country’s $12 billion (Dh44 billion) loan accord, amid expectations to tackle a debate on how best to curb inflation. The team will hold talks with Finance Ministry and central bank officials during the visit, which is scheduled to end on May 11.

The visit is preceded by remarks from top IMF officials emphasising the need for policymakers to make tackling inflation a priority. Jihad Azour, the IMF Middle East chief, highlighted interest rates as the “right instrument” to tame inflation, though he later listed them as one option among a set of tools.

Azour’s remarks have fuelled speculation that the IMF is recommending that Egypt raise interest rates again after inflation accelerated to more than 30 percent following the central bank’s decision to float the currency in November.

The comments came at a time when economists point to a slowing pace of price increases as a sign that inflation may be peaking. Capital Economics said April 10 that “the central bank is unlikely to tighten monetary policy further.”

The central bank’s decision to abandon currency controls earlier on November 3 helped clinch the IMF loan agreement, which officials say is key to restoring investor confidence in the economy. On the same day, the central bank raised interest rates by 300 basis points to 14.75 per cent.

The Monetary Policy Committee (MPC) holds eight regularly scheduled meetings during the year and other meetings as needed.

These are the 2017 MPC Meetings