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Egypt Monetary Policy November 2018

Egypt: Central Bank stands pat in November

At its monetary policy meeting held on 15 November, 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 decision to stand pat was taken against a backdrop of a greater-than-expected acceleration in inflation, which hit 17.7% in October. At its November meeting, the Bank noted that its inflation target of 13% plus or minus three percentage points now faces upside risks, while also providing assurances that “current policy rates remain in line with achieving single digit inflation as soon as the effects of fiscal consolidation measures dissipate”. In recent months, the economic picture has been mixed despite robust economic growth in the April–June period as highlighted by operating conditions in the non-oil private sector, which improved in July and August but subsequently deteriorated in September and October.

There was little forward guidance regarding monetary policy intentions in November, although 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 inflation. 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 27 December.

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