Cityscape in Egypt

Egypt Monetary Policy June 2018

Egypt: Central Bank stands pat for the second consecutive time in June

At its monetary policy meeting held on 28 June, the Central Bank of Egypt (CBE) left the overnight deposit rate at 16.75%, the overnight lending rate at 17.75% and the main operation rate at 17.25%. All decisions were in line with market expectations and came after the CBE cut all rates in March with the aim of boosting the economy.

Inflationary pressures have been moderating in recent months—inflation hit the lowest rate recorded since April 2016 in May. Nevertheless, at its June meeting, the Central Bank of Egypt noted that the government’s recent structural reforms to the economy—in line with the country’s IMF support program worth USD 12 billion in loans, which incentivized the government to introduce another round of subsidy cuts in June—have the potential to cause a “one-off increase in the price level, which [could] translate into [temporarily] higher inflation rates”. The CBE will have likely wanted to monitor the exact impact of these recent developments on inflation before continuing its rate-cutting trajectory.

The Central Bank of Egypt provided little forward guidance regarding its monetary policy intentions in June, only noting that its inflation target range of 10.0%–16.0% for the end of 2018 remained in place and that it “would not hesitate to adjust its [monetary policy] stance” to achieve steady inflation in the medium term. Despite the minimal guidance, it can be understood that the CBE will continue its rate-cutting path in support of economic growth while carefully monitoring inflation developments in the coming months.

The next monetary policy meeting will be held on 16 August.

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