The IMF expects Egypt’s inflation rate to drop to 16% as the Central Bank keeps interest rates high

06:52 PM

Friday, November 1, 2024

Manal Al-Masry wrote:
The International Monetary Fund expects headline inflation in Egypt to approach 16% by the end of the 2024/25 fiscal year, as base-year effects fade and the central bank continues to continued a tight monetary policy with high interest rates.

Inflation rate accelerated in the last two months, registering 26.4% in September from 26.2% in August due to increase in gasoline, diesel and electricity prices after falling for 5 months in a row.

The inflation rate is higher than the Central Bank’s target of 7%, more or less 2%, by the end of this year.

The Central Bank raised the interest rate by 19% in the last two and a half years with the aim of preventing inflation as a result of freeing the exchange rate.

In March last year, the Central Bank began to increase the interest rate by 6% at the same time in a separate meeting of the Monetary Policy Committee, to reach the maximum rate of 27.25% for deposits and 28.25% for loans , to include the resulting inflationary pressures. the fourth wave of exchange rate liberalization.

Although the Central Bank kept interest rates unchanged in the last 4 meetings in a row.
The International Monetary Fund, which is financing Egypt’s economic reform program with an $8 billion loan, is asking the Central Bank to target inflation while continuing to maintain policy tight monetary policy to ensure that inflation is on a steady downward path.

At the same time, the Fund emphasizes the need for Egypt to maintain the flexibility of the exchange rate of the pound against foreign currencies, which it considers a cornerstone of the success of the economic reform program .