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Egypt Monetary Policy September 2021

Egypt: Central Bank keeps rates unchanged in September

At its monetary policy meeting on 16 September, the Central Bank of Egypt (CBE) kept the overnight deposit, overnight lending and main operation rates unchanged at 8.25%, 9.25% and 8.75%, respectively. The decision marked the seventh consecutive hold and was broadly expected by market analysts.

The Bank’s decision came amid relatively mild price pressures so far this year, with inflation remaining within the 5.0%–9.0% target range in July and August, despite picking up pace. The Bank noted that the acceleration in inflation was largely due to a base effect and higher prices for food. Moreover, upwardly revised national accounts data showed that GDP expanded 7.7% on an annual basis in April–June (January–March: +2.9% yoy), which would imply the economy grew 3.3% overall in FY 2021 (July 2020–June 2021). Consequently, the accelerating economic recovery likely gave the Bank room to keep rates unchanged.

The Bank did not provide hints on future policy, but stated once again that it “closely monitors all economic developments and will not hesitate to utilize all available tools to support the recovery of economic activity, within its price stability mandate”. The majority of our panelists see rates unchanged until the end of the year, although a few see room for rate cuts.

The next monetary policy meeting is set for 28 October.

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