Egypt’s central bank keeps key interest rates unchanged

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Egypt’s central bank kept its overnight interest rates steady on Thursday, as expected, saying that while economic growth had slowed, rising non-food inflation had offset a steady decline in food inflation.

The meeting of the central bank’s Monetary Policy Committee (MPC) was its first since Egypt signed an $8bn financial support agreement with the International Monetary Fund (IMF) in March, when it hiked rates by 600 basis points (bps).

The MPC on Thursday left the lending rate unchanged at 28.25 per cent and the deposit rate at 27.25 per cent, it said in a statement.

The hold was widely expected, with only one of 19 analysts in a Reuters poll forecasting that the MPC would lower rates.

Interest rates are still well below the headline inflation rate, which was running at 32.5 per cent in April. Inflation has declined from a record 38 per cent in September 2023.

“Forecasts indicate that inflation has already peaked and thus is expected to moderate in 2024 as inflationary pressures begin to subside,” the MPC said in a statement accompanying the interest rates decision.

The MPC said economic growth had slowed to 2.3 per cent in the fourth quarter of 2023 from 4.2 per cent a year earlier and that indicators suggested growth would remain subdued in the first quarter of 2024.

The central bank raised interest rates on March 6 as part of its agreement with the IMF, bringing total increases since the beginning of the year to 800 bps.

As part of the IMF agreement, Egypt allowed its currency to tumble to under EGP50 to the dollar after having fixed it at EGP30.85 for a year. The Egyptian pound has since strengthened to about EGP47.1 to the dollar.

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