Cityscape in Egypt

Egypt Monetary Policy May 2018

Egypt: Central Bank stands pat in May

At its monetary policy meeting held on 17 May, 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 at its earlier meeting in March with the aim of boosting the economy.

Although the CBE left the key interest rates unchanged in May, it noted that international oil prices have risen quickly in recent months, leading to increased inflationary risks for Egypt. Still, headline inflation decelerated to 13.1% in April from 13.3% in March, while core inflation remained unchanged in April at 11.6%.

The Central Bank of Egypt provided little forward guidance regarding its monetary policy intentions in May, although it noted that its inflation target range of 10.0%–16.0% for the end of 2018 remained in place. Analysts surveyed by FocusEconomics in the past month concur and expect inflation to be comfortably within the band come year-end. As inflationary pressures moderate over the coming months, the CBE is likely to cut rates further to stimulate the economy. However, it will remain wary of the inflationary impact of fuel subsidy cuts that are expected from the government later this year as it continues with IMF-backed structural reforms.

The next monetary policy meeting will be held on 28 June.

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