Cityscape in Egypt

Egypt Monetary Policy July 2019

Egypt: Central Bank of Egypt holds interest rates steady in July

The Central Bank of Egypt (CBE) left all interest rates unchanged at its monetary policy meeting on 11 July, as had been expected by most market analysts. Therefore, the overnight deposit rate remains at 15.75%, the overnight lending rate at 16.75% and the main operation rate at 16.25%.

The CBE noted that inflation moderated substantially to 9.4% in June from 14.1% in May, representing the lowest inflation rate since March 2016. However, despite this, inflation is expected to pick up again in July and August due to the effects of fresh energy subsidy cuts which took effect in July, although the uptick should be tempered by the recent appreciation of the pound. As a result, the Central Bank took the view that early July was not the perfect moment for another rate cut. Moreover, the economy has performed well recently, growing at an accelerated pace in April–June, likely providing the Central Bank with additional wiggle room to delay further easing.

Looking ahead, the CBE is likely to hold interest rates in the short-term, allowing for the inflationary effects of the recent subsidy cuts to fade slightly, before deciding on the timing of its next interest rate cut. The foreign exchange market will be of importance in this regard, as if the pound holds its value or appreciates further, this could allow for an earlier rate cut. The next monetary policy meeting is scheduled for 22 August.

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