Cityscape in Egypt

Egypt Monetary Policy December 2018

Egypt: Central Bank stands pat in December

At its monetary policy meeting held on 27 December, 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 Central Bank of Egypt noted that inflation has moderated recently, slowing to 15.7% in November from 17.7% in October. It also pointed out that core inflation fell to the lowest rate since February 2016 in November. With GDP growth stabilizing in Q1 FY 2019 (July to September 2018) at 5.3%, slightly under the 5.4% of the previous quarter, the CBE appeared confident that inflation pressures would broadly continue to reduce going forward. The CBE added that current interest rates are compatible with that thinking and adjusted its inflation target to 9.0% plus or minus three percentage points for Q2 FY 2021, down from 13.0% plus or minus three percentage points for Q4 FY 2018.

Looking ahead, the Central Bank 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, particularly the inflation trajectory. Indeed, the CBE 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 is scheduled for 14 February.

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