Cityscape in Egypt

Egypt Monetary Policy June 2023

Egypt: Central Bank meets expectations and stays put once again in June

At its 22 June meeting, the Central Bank of Egypt (CBE) met market expectations by extending its tightening cycle pause for a second consecutive meeting. Consequently, the overnight deposit, overnight lending and main operations rates stood at 18.25%, 19.25% and 18.75%, respectively. The move mirrored 18 May’s decision.

The Bank’s decision came despite accelerating headline and core inflation in May. The CBE stated the acceleration was broadly in line with its expectations, as higher price growth was driven by seasonal demand for food items and recent government’s battery of measures. With regard to activity, the Bank noted it had slowed in H1 FY 2023 (July–December 2022), and high frequency data suggests it moderated further in H2. Consequently, the policy committee decided to stand pat to continue to assess the overall impact of the cumulative 1,000 basis point increase since March 2022.

In its communiqué, the CBE did not provide any specific hints on future policy moves, but the tone remained hawkish. It reiterated that the policy rate remained contingent on inflation forecasts, rather than historical data. As such, the CBE stated that a tight policy stance was necessary to bring inflation within its 5.0–9.0% target band by Q4 2024 and 3.0–7.0% by Q4 2026. The Consensus sees further tightening this year.

The next monetary policy meeting is set for 3 August.

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