Cairo – Mubasher: The Central Bank of Egypt’s (CBE) Monetary Policy Committee (MPC) kept its key interest rates unchanged, maintaining the overnight deposit rate at 27.25%, the overnight lending rate at 28.25%, and the main operation rate at 27.75%.
The MPC also maintained the discount rate at 27.75%, according to a press release.
The decision reflects both global and domestic economic conditions since its last meeting. On a global scale, economic growth is positive, but still lags behind historical averages.
While monetary tightening cycles in advanced and emerging markets have successfully curbed global inflation, key central banks are expected to maintain tight monetary policies due to persistent inflation uncertainties and potential risks.
Notably, international commodity prices, especially energy, have declined due to reduced global demand, yet remain susceptible to geopolitical supply shocks.
Domestically, Egypt's real GDP growth slowed slightly to 2.20% in the first quarter (Q1) of 2024 from 2.30% in the previous quarter, largely due to geopolitical tensions and disruptions in maritime trade impacting the services sector.
Preliminary indicators for Q2-24 suggest continued subdued economic activity, forecasting slower growth for the fiscal year (FY) 2023/2024 with a recovery anticipated in FY24/25.
The labour market showed slight improvement, with unemployment falling to 6.70% in Q1-24 from 6.90% in Q4-23.
Inflation has been on a downward trend, with annual headline and core inflation decreasing for the fourth consecutive month to 27.50% and 26.60% in June 2024, respectively.
This decline is attributed to the waning effects of previous economic shocks, the impact of recent monetary tightening, and favourable base effects from high inflation episodes in 2023. Notably, annual food inflation plummeted to 31.90% in June 2024 from a peak of 73.60% in September 2023.
The CBE expects inflation to stabilise around current levels throughout 2024, with a significant decline anticipated in the first half (H1) of 2025.
However, potential risks to this disinflation trajectory include escalating geopolitical tensions, adverse climate conditions, and more stringent fiscal measures than expected.
In its last meeting in May 2024, the CBE’s MPC decided to maintain interest rates.
Egypt’s annual headline inflation rate slowed down to 27.10% in June 2024 from 27.40% in May.
The country has achieved a primary budget surplus of EGP 857 billion in FY23/24, up 422.56% year-on-year (YoY) from around EGP 164 billion in the previous FY.
