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Egypt Monetary Policy February 2022

Egypt: Central Bank holds fire in first meeting of the year, meeting expectations

At its first monetary policy meeting of the year held on 3 February, the Central Bank of Egypt (CBE) opted to maintain the overnight deposit, overnight lending and main operations rates unchanged at 8.25%, 9.25% and 8.75%, respectively. The decision, which marked the 10th consecutive hold, met market analysts’ expectations.

The Bank’s decision was supported by both headline and core inflation remaining well within target, despite accelerating in December. Additionally, the CBE suggested that the pickup was caused by a statistical effect, higher commodity prices and fiscal consolidation measures, providing it with ample room to leave rates unchanged. Turning to the economy, the CBE noted that high-frequency indicators revealed “a continued expansion across most economic sectors” and that the unemployment rate had stabilized around its pre-pandemic level in Q3 2021. It also confirmed its December preliminary estimate of 9.8% annual GDP growth for July–September.

With regard to forward guidance, the Bank did not provide explicit hints on future policy moves in its communiqué, but reiterated that it “closely monitors all economic developments and will not hesitate to utilize all available tools to achieve its price stability mandate”. It also noted its aim to keep inflation within its 5.0%–9.0% target band in the short and medium term. Half of our panelists see rates remaining unchanged this year, while the rest are split between tighter conditions and rate cuts.

The next monetary policy meeting is set for 24 March.

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