Egypt central bank keeps interest rates steady as growth dips
The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) opted to maintain interest rates at its final meeting of 2023. The overnight deposit rate and overnight lending rate were held steady at 19.25% and 20.25%, respectively. Furthermore, the main operation rate and the discount rate remained unchanged at 19.75%.
The decision was influenced by global economic factors, with the CBE noting a slowdown in global economic growth and a downward revision of the outlook compared to the previous meeting. This was attributed to the continued impact of policy rate increases by major central banks on demand. Additionally, key international commodity prices, particularly energy, had declined due to reduced speculation over oil supply shortages and subdued global demand.
The CBE acknowledged that mounting geopolitical tensions had heightened uncertainty in the inflation outlook, particularly concerning oil prices. The bank stated its commitment to assessing the overall impact of previously implemented tightening policies and their transmission to the economy through a data-driven approach.
The Monetary Policy Committee (MPC) emphasized that the trajectory of future policy rates will be contingent on forecasted inflation rather than current inflation rates. The Central Bank of Egypt (CBE) asserted that the MPC is prepared to deploy all available tools to maintain a sufficiently restrictive policy stance, aiming to sustain the decreasing trend in underlying inflation. The tight monetary stance is designed to guide future annual inflation rates toward the forthcoming target levels established by the CBE, ensuring price stability in the medium term. It is noteworthy that Egypt's annual headline inflation decreased to 36.4% in November, down from 38.5% in October. Throughout 2023, the CBE implemented interest rate hikes totaling 300 basis points, with increases of 200 basis points in March and an additional 100 basis points in August. This strategic tightening of monetary policy reflects the central bank's commitment to managing inflationary pressures and promoting economic stability.