Egypt’s central bank holds interest rates steady, signals wait-and-see stance

Egypt’s central bank on Thursday decided to keep key policy rates unchanged, maintaining a tight monetary stance amid rising inflation and heightened regional uncertainty.

The Monetary Policy Committee (MPC) kept the overnight deposit rate at 19.0 percent, the overnight lending rate at 20.0 percent, and the main operation rate at 19.5 percent. The discount rate was also maintained at 19.5 percent.

“This decision reflects the Committee’s assessment of prevailing inflation dynamics and the evolving outlook since the previous MPC meeting.” the committee said in a statement.

Annual headline inflation rose to 13.4 per cent in February from 11.9 per cent in January, while core inflation climbed to 12.7 per cent, driven by education fees and seasonal increases in certain food items.

The Central Bank of Egypt (CBE) noted that global economic growth has slowed due to escalating conflict in the region, which has disrupted trade and pushed up energy and agricultural prices. These developments, combined with domestic fiscal consolidation and exchange rate adjustments, are weighing on Egypt’s external demand and growth outlook.

Forecasts 

CBE projections indicate that real GDP growth is expected to slow to around 4.9 percent for the fiscal year 2025/26, down from 5.1 percent projected in February. Non-petroleum sectors such as manufacturing, trade, and communications are expected to continue supporting activity, though output is likely to remain below potential for longer.

Wait-and-See Approach 

Given these factors, the MPC opted to pause its easing cycle, adopting a “wait-and-see” approach to preserve positive real interest margins and anchor inflation expectations. The committee said future decisions will depend on incoming data, the forecasted inflation trajectory, and evolving global and domestic risks.

“The Committee will continue to remain vigilant and stands prepared to adjust its policy instruments as needed to fulfil its price-stability mandate in the medium term.” the CBE said.

Attribution: Amwal Al Ghad English