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Egypt Monetary Policy August 2018

Egypt: Central Bank stands pat in August for the third consecutive time

At its monetary policy meeting held on 16 August, 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 supporting economic activity.

The Egyptian economy appears to be in a strong position, with growth hitting a multi-year high in April–June. Despite this, price pressures have been moderating: Inflation slowed to 13.5% in July after an acceleration in June ended a slowdown that lasted 10 consecutive months. At its August monetary policy meeting, the Central Bank noted that the inflation trajectory continues to be in line with its target range of between 10% and 16% in Q4 2018, which was set in May 2017.

Although economic growth is good and inflation is slowing, the CBE noted several uncertainties at its monetary policy meeting. These included tightening global financial conditions, escalating trade tensions and volatile oil prices. The CBE therefore decided to maintain the status quo in August, which was also “consistent with achieving this inflation outlook and target path”.

There was little forward guidance regarding monetary policy intentions in August, although the Central Bank of Egypt is likely to continue pursuing a gradual loosening of monetary policy in the short term, with the aim of supporting economic activity, while monitoring economic developments. Nevertheless, the Central Bank noted that it would “not hesitate to adjust its stance to achieve its mandate of price stability over the medium term”.

The next monetary policy meeting will be held on 27 September.

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