Monetary Policy Committee Maintains Key Interest Rate

Decision Reflects Global and Local Economic Developments

The Monetary Policy Committee of the Central Bank of Egypt has decided to maintain the overnight deposit and lending rates, as well as the central bank’s main operation rate, at 27.25%, 28.25%, and 27.75%, respectively. The credit and discount rate will also remain at 27.75%.

Global Economic Developments

Globally, economic growth has remained stable, albeit lower than pre-pandemic levels. Monetary tightening policies in developed and emerging market economies have contributed to declining global inflation. Some central banks have cut key interest rates as inflation approaches target levels. Fiscal conditions have eased slightly due to downside risks associated with employment and economic growth.

Domestic Economic Developments

Real GDP growth in Egypt slowed to 2.2% in the first quarter of 2024, down from 2.3% in the fourth quarter of 2023. This slowdown is attributed to the decline in the public sector’s contribution to economic activity. Recent increases in private sector economic activity were not enough to compensate for this decline. However, preliminary indicators for the second quarter of 2024 suggest that real GDP growth has started to pick up.

Inflationary Pressures

Inflationary pressures have eased, with headline annual inflation at 25.7% and core inflation at 24.4% for the fifth consecutive month in July 2024. Non-food inflation remains high, but a significant decline in annual food inflation has moderated headline inflation. The annual rate of food inflation recorded 29.7% in July 2024, the lowest rate in almost two years.

Outlook and Risks

The slowdown in inflation indicates that monthly inflation rates have returned to their normal pattern due to recent monetary tightening. Expectations suggest that inflation will record rates close to its current level until the fourth quarter of 2024. However, the downward trajectory of inflation remains vulnerable to upside risks, including dwindling global oil supplies and rising regional geopolitical tensions.

Monetary Policy Committee’s Decision

The Monetary Policy Committee believes that it is appropriate to keep the key interest rate unchanged until inflation declines significantly and sustainably. The Committee will continue to assess the impact of its decisions on the economy and will closely follow economic developments to ensure price stability over the medium term.