In its most recent meeting, the Central Bank of Egypt decided to keep overnight interest rates unchanged. The bank attributed this decision to the fact that while there has been a slowdown in economic growth, higher inflation in non-food commodities has offset the impact of declining food commodity inflation. This decision follows Egypt’s agreement with the International Monetary Fund for financial support worth eight billion dollars, which led to a previous increase of 600 basis points in interest rates.
The Monetary Policy Committee maintained the overnight lending rate at 28.25 percent and the overnight deposit rate at 27.25 percent. This decision was widely expected, with only one out of 19 analysts predicting a rate cut. Despite this, inflation in Egyptian cities reached 32.5 percent in April but has decreased from a record high of 38 percent in September.
The committee expects inflation to moderate as inflationary pressures subside throughout 2024. Economic growth slowed to 2.3 percent in the fourth quarter of 2023 from 4.2 percent a year ago, indicating continued weak growth in the first quarter of 2024. The Central Bank had previously raised interest rates by 800 basis points since the start of the year as part of its IMF agreement, which also allowed the Egyptian pound to depreciate.
However, since then, the price of the Egyptian pound has risen to about 47.1 pounds to the dollar due to its resilience despite economic challenges and political instability in Egypt’s economy remains strong thanks to these measures taken by central bank officials.
In conclusion, despite economic challenges and political instability, Central Bank officials are focused on stabilizing inflation and supporting economic growth through their decisions and actions taken towards it.
