The Central Bank of Egypt (CBE) increased the overnight deposit rate to 21.25%, the overnight lending rate to 22.25%, the rate of the main operation to 21.75%, and the discount rate was also raised to 21.75%
The central bank’s Monetary Policy Committee (MPC) decided to raise key interest rates during its inaugural 2024 meeting by 200 basis points.
The Central Bank of Egypt (CBE) increased the overnight deposit rate to 21.25%, the overnight lending rate to 22.25%, the rate of the main operation to 21.75%, and the discount rate was also raised to 21.75%.
The CBE pointed towards an uncertain inflation outlook caused by growing geopolitical tensions and ongoing trade disruptions in the Red Sea, highlighting its impact on supply chains and key commodity prices.
The decision was made to “anchor inflation expectations and set the policy rate at sufficiently restrictive levels” to maintain a slowdown of inflation.
The MPC meeting comes as the Egyptian economy faces several challenges, particularly a growing gap between official and black market foreign exchange rates and hiking commodity prices despite a slowdown in inflation in recent months.
Egypt’s real GDP growth was reported at 2.7% for Q3 2023 compared to 2.9% in Q2, boosted by the trade, agriculture, and communication sectors, however, leading indicators for the final quarter of the year pointed towards a general slowdown.
The CBE expects real GDP growth to slow during FY2023/2024, but forecasts growth to climb after “in light of actual developments and the negative spillovers from ongoing regional instability and maritime trade disruptions in the Red Sea on the services sector.”
The unemployment rate remained broadly stable at 7.1% in Q3 2023.
Annual headline inflation was reported at 33.7% for December 2023, with core inflation data recorded at 34.2%, with the central bank citing favorable base effects.
“However, recent developments indicate higher-than-expected monthly dynamics and sustained inflationary pressures. This is reflected by persistent non-food and food inflation, which is expected to continue in light of fiscal consolidation measures, as well as prolonged supply-side pressures. Moreover, elevated broad money growth running above its historical average further contributed to existing inflationary pressures,” it wrote.
