Cityscape in Egypt

Egypt Monetary Policy January 2020

Egypt: Central Bank leaves interest rates unchanged in January

The Central Bank of Egypt (CBE) held interest rates steady at its monetary policy meeting on 16 January, leaving the overnight deposit rate at 12.25%. This decision confounded market analysts, most of whom had been expecting another cut; in the 12 months leading up to this latest meeting, the CBE had axed interest rates by 450 basis points.

The CBE likely left rates unchanged to avoid adding immediate upward pressure to inflation, which jumped to 7.1% in December from 3.6% in November, climbing into the lower bound of the Central Bank’s Q4 CY 2020 target range of 6.0% to 12.0%. Moreover, the temporary spike in oil prices in early January following the dramatic intensification of tensions between the U.S. and Iran could have stoked concern about future oil-price induced inflation. However, economic growth appears to be slowing in Egypt and the pound has strengthened in recent months, which could ease inflationary pressures, so another interest rate cut will not be far from the minds of central bankers.

Despite January’s pause, the general trend for interest rates will likely be downward, as contained inflation should allow the CBE to make further rate cuts to bolster economic growth.

The next monetary policy meeting is set for 20 February.

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