Egypt’s central bank leaves key interest rates unchanged

Egypt’s central bank left its overnight interest rates unchanged on Thursday, as expected, saying economic growth remained slow but that inflation has been decreasing.

The bank’s Monetary Policy Committee (MPC) left the deposit rate at 27.25 per cent and the lending rate at 28.25 per cent.

All but one of 18 analysts in a Reuters poll had expected rates to remain unchanged, with the sole analyst forecasting a cut of 100 basis points (bps).

The decision keeps the overnight deposit rate below that of headline inflation, which was 27.5 per cent in June. Real interest rates have been negative since January 2022. Inflation declined in June for a fourth straight month after soaring to a record 38 per cent in September.

The MPC expects inflation to come down sharply in the first half of 2025.

“The gradual unwinding of food inflation along with the improvement of inflation expectations suggest that inflation is on a sustained downward trajectory,” the MPC said.

Gross domestic product inched down to an annualised 2.2 per cent in the first quarter from 2.3 per cent in the final quarter of 2023, the MPC added.

“Leading indicators for Q2 2024 suggest that economic activity remains subdued. Consequently, real GDP growth is expected to slow down in FY 2023/24 compared to the previous fiscal year before recovering in FY 2024/25,” it said.

Egypt reported GDP of 3.8 per cent in 2022/23.

The central bank raised interest rates by 600 bps on March 6 as part of an agreement with the IMF, bringing total increases since the beginning of the year to 800 bps. Egypt also sharply devalued its currency against the dollar under its IMF accord.

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