Central Bank of Egypt Maintains Interest Rates at 18.75% – Latest Monetary Policy Update

Egyptian Central Bank Keeps Interest Rates Unchanged

The Monetary Policy Committee of the Central Bank of Egypt has decided to keep the interest rates unchanged in its latest meeting. The rates of the overnight deposit and lending return and the price of the main operation of the Central Bank will remain at 18.25%, 19.25%, and 18.75%, respectively. The credit and discount rate was also kept at 18.75%.

The decision comes as global commodity price expectations continue to decline, although inflation levels remain higher than targeted in major economies. The financial conditions of advanced economies have also faced some constraints, leading to a slight decline in global economic growth forecasts.

At the local level, the growth rate of real economic activity recorded 3.9% during the fourth quarter of 2022, driven by the positive contribution of net exports and the private sector. However, preliminary indicators suggest a slowdown in GDP growth during the first quarter of 2023. It is expected that the growth rate will recover in the fiscal year 2022/2023.

The unemployment rate in Egypt decreased slightly to 7.1% during the first quarter of 2023, mainly due to an increase in the number of workers. However, annual general and core urban inflation rates were 32.7% and 40.3% in May 2023, respectively, primarily driven by the rise in food and non-food commodity prices.

The Monetary Policy Committee stated that it will continue to assess the impact of the restrictive monetary policy on the economy and stressed that the path of interest rates depends on expected inflation rates. The committee will monitor economic developments and expectations and use all available monetary policy tools to maintain restrictive monetary conditions and achieve the target inflation rates.

The Central Bank of Egypt aims to achieve an average inflation rate of 7% (± 2 percentage points) during the fourth quarter of 2024 and 5% (± 2 percentage points) during the fourth quarter of 2026.

Overall, the decision to keep interest rates unchanged reflects the Central Bank’s cautious approach to balance economic growth and inflationary pressures in Egypt.

What were the factors considered by the Monetary Policy Committee of the Central Bank of Egypt in deciding to hold interest rates steady?

Egyptian Central Bank Holds Interest Rates Steady

The Central Bank of Egypt’s Monetary Policy Committee has chosen to maintain its current interest rates in its most recent meeting. The overnight deposit and lending return rates, as well as the main operation price of the Central Bank, will stay at 18.25%, 19.25%, and 18.75% respectively. The credit and discount rate were also left unchanged at 18.75%.

The decision comes amid a continuous decrease in global commodity price expectations, although inflation levels remain higher than desired in major economies. The financial conditions of advanced economies have also encountered some restrictions, resulting in a slight decline in global economic growth predictions.

On a domestic level, real economic activity experienced a growth rate of 3.9% in the fourth quarter of 2022, driven by positive contributions from net exports and the private sector. However, preliminary indicators indicate a slowdown in GDP growth during the first quarter of 2023. It is anticipated that the growth rate will recover in the fiscal year 2022/2023.

During the first quarter of 2023, the unemployment rate in Egypt slightly decreased to 7.1% mainly due to an increase in the number of workers. However, annual general and core urban inflation rates reached 32.7% and 40.3% in May 2023, primarily influenced by the rise in food and non-food commodity prices.

The Monetary Policy Committee expressed its intention to continuously assess the impact of its restrictive monetary policy on the economy. It emphasized that the path of interest rates depends on expected inflation rates. The committee will closely monitor economic developments and expectations, utilizing all available monetary policy tools to maintain restrictive monetary conditions and achieve the target inflation rates.

The Central Bank of Egypt aims to achieve an average inflation rate of 7% (± 2 percentage points) by the fourth quarter of 2024 and 5% (± 2 percentage points) by the fourth quarter of 2026.

Overall, the decision to maintain unchanged interest rates reflects the cautious approach of the Central Bank in balancing economic growth and inflationary pressures in Egypt.