Cityscape in Egypt

Egypt Monetary Policy February 2021

Egypt: Central Bank holds rates unchanged at second successive meeting in February

At its monetary policy meeting on 4 February, the Central Bank of Egypt (CBE) left the overnight deposit, overnight lending and main operation rates unchanged at 8.25%, 9.25% and 8.75% respectively. The decision marked the second hold in successive meetings following a total of 400 basis points of cuts since March 2020, and was in line with market analysts’ expectations.

The hold came amid relatively benign inflationary pressures towards the end of 2020, with inflation clocking 5.2% in Q4 and thus coming in below last year’s target floor of 6.0%. The Bank put the deviation down to the impact of the Covid-19 pandemic, with government measures to avoid food shortages contributing to lower-than-expected inflation. Moreover, the decision came amid a gradual recovery in activity—preliminary data for July–September indicated the economy grew 0.7% in annual terms (April–June: -1.7% yoy)—which likely gave the Bank further room to take a wait-and-see approach.

Looking ahead, the CBE stated in its communiqué that it “will not hesitate to utilize all available tools to support the recovery of economic activity, within its price stability mandate”.

Regarding the outlook, Farouk Soussa and Rositsa Chankova, analysts at Goldman Sachs, commented:

“We believe there is scope for further easing in the near term, particularly if vaccine commitments materialise, a development that would further ease external financing risks. In our view, inflation will remain [subdued] as a result of sluggish domestic demand, a strong Pound and continued public management of domestic food supplies. […] Despite the recent reduction of the inflation target to 7% ± 2pp, our expectations of low inflation, an improving global risk environment, and still historically high real rates underpin our view on Egypt policy rates, which we think may be lowered by another 100bp in H1 of this year.”

The next monetary policy meeting is set for 18 March.

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest