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Egypt Monetary Policy September 2023

Egypt: Central Bank pauses tightening cycle in September, meeting expectations

At its 21 September meeting, the Central Bank of Egypt (CBE) held fire and left the overnight deposit, overnight lending and main operations rates unchanged at 19.25%, 20.25% and 19.75%, respectively. The decision, which came on the heels of August’s 100 basis point increase, had been largely priced in by markets.

The decision to hold reflected the Bank’s assessment that core inflation may have peaked and is now on a gradual downward path, as it fell marginally in both July and August, despite headline inflation rising to fresh record highs in both months. The Bank was unconcerned by this, attributing it to seasonal and weather-related factors affecting volatile items, such as food. Moreover, the CBE noted that these increases in headline inflation had been broadly anticipated.

The Bank’s communiqué was void of explicit forward guidance, but it reiterated that future policy moves would depend on forecast inflation, rather than historical data. Consequently, the Bank stands ready to use all available tools to bring inflation back to target by end-2024. The majority of our panelists have penciled in further rate increases before the end of this calendar year.

The next monetary policy meeting is set for 2 November.

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