Egypt Interest Rate

The Central Bank of Egypt maintained interest rate at a record high of 27.25% on July 18th, for the second consecutive meeting, reflecting recent global and domestic economic developments. Inflationary pressures have eased, with annual headline inflation falling to 27.5% in June 2024, marking the fourth consecutive month of decline. Moreover, despite persistent non-food inflation, improvements in market dynamics have significantly reduced annual food inflation to 31.9% from a peak of 73.6% in September 2023. Meanwhile, real GDP growth in Egypt slowed to 2.2% in Q1 2024, down from 2.3% in the previous quarter, primarily due to geopolitical tensions and maritime trade disruptions. The MPC considers the current monetary stance appropriate to support the continued moderation of inflation and will persist in assessing economic data to guide future policy decisions.

The central bank of Egypt kept interest rates at a record high of 27.25% during its meeting on May 23th 2024, the same as the overnight lending rate at 28.25%, also an all-time high. This decision, influenced by global economic growth prospects and local inflation trends, reflects a cautious approach amidst uncertainties in commodity markets due to geopolitical tensions. Domestically, while real GDP growth slowed to 2.3% in Q4 2023 and 2.5% in H1 2023/2024, inflationary pressures have eased, with headline and core inflation declining to 32.5% and 31.8% in April 2024, respectively. Although inflation remains a concern, expectations suggest moderation, aided by factors like foreign direct investment inflows and an improved external financing environment. The Committee sees the current monetary stance as appropriate, but remains vigilant against potential inflation risks, emphasizing readiness to utilize monetary tools to sustainably reduce inflation.

The central bank of Egypt raised interest rates by 600bps during an unscheduled meeting on March 6th 2024, pushing the key overnight deposit rate to a record high of 27.25% and the overnight lending rate to 28.25%, also an all-time high. The decision, which follows a 200bps hike back in February, aims to accelerate the monetary tightening process in order to fast-track the disinflation path and ensure a decline in underlying inflation. The central bank also noted that the latest tightening brings the monetary stance to a sufficiently restrictive level, to anchor inflation expectations, and will be maintained for as long as necessary to achieve the desired disinflation course. Inflation in Egypt remains elevated at 29.8% and the central bank expects it to remain well above the 7% target this year. Also, the Egyptian economy has been recently hit by foreign exchange shortages resulting in the existence of a parallel exchange rate market and constraining economic growth.