Cityscape in Egypt

Egypt Monetary Policy January 2024

Egypt: Central Bank tightens again in February, taking markets by surprise

At its first scheduled meeting of the year on 1 February, the Central Bank of Egypt (CBE) resumed its tightening cycle; it hiked rates by 200 basis points, bringing the overnight deposit, overnight lending and main operations rates to 21.25%, 22.25% and 21.75%, respectively. The move, which brought the cumulative rate increase since March 2022 to 1,300 basis points, was the first increase since August 2023 and took markets by surprise.

While the CBE noted that headline and core inflation moderated further in December, this was largely due to a high base of comparison. Additionally, December’s data surpassed the Bank’s expectations and remained over three times above the upper bound of the CBE’s 5.0–9.0% target band. The Bank also noted that broad money growth remained above its historical average and that both supply-side pressures and fiscal consolidation measures had continued to fuel inflation. Thus, the CBE assessed risks to the outlook as skewed to the upside and deemed a tighter monetary policy stance necessary to anchor inflation expectations and help consolidate inflation’s downward trend.

Regarding activity, the CBE released national accounts data estimates: Annual GDP growth slowed to 2.7% in July–September 2023, down from 2.9% in the prior three months. Moreover, high-frequency data signaled a further slowdown in Q4 2023.

The CBE’s communiqué was void of explicit forward guidance. The Bank once again stated it stood ready to use all available tools to achieve price stability and that the path of the policy rate remained a function of forecast inflation, rather than historical data.

In light of the surprise hike, most of our panelists are currently updating their forecasts; those who have already done so see further hikes in calendar year 2024. The next meeting is scheduled for 28 March.

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest