Egypt Monetary Policy


Egypt: Central Bank maintains rates in November as economy gains traction

November 27, 2014

At its 27 November monetary policy meeting, the Central Bank decided to leave the overnight deposit rate unchanged at 9.25%. The decision was in line with market expectations. The Bank also maintained the overnight lending rate, the main operation rate, and the discount rate unchanged at 10.25%, 9.75%, and 9.75%, respectively. The Bank determined that it was appropriate not to change the rates amid improving growth prospects and relatively contained inflationary pressures.

The Bank emphasized that GDP grew a solid 3.7% in the last quarter of fiscal year 2014 (April-June). This result followed the 2.5% increase tallied in the previous quarter and was well above the sluggish growth rates posted in the first half of the fiscal year. Growth in the fourth quarter was driven by an acceleration in the manufacturing, real estate and construction sectors. Investment growth improved, but remained below its historical average. Going forward, investment in large infrastructure projects, particularly the Suez Canal upgrade, are expected to drive economic growth.

Regarding price developments, the Bank explained that inflation jumped from 11.1% in September to 11.8% in October due to increases in education fees, which coincide with the start of a new school year. However, core inflation eased in October amid a decline in food prices. The Bank noted that the risk of imported inflation is limited due to global developments. The next monetary policy meeting is scheduled for January 2015.

For 2014, panelists expect the monetary policy rate to end the year at 9.06%. For 2015, the panel expects the policy rate to end the year at 8.75%.

Author:, Economist

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