In its last monetary policy meeting for 2023, Egypt’s central bank, the Central Bank of Egypt (CBE), has opted to maintain its key interest rates. The Monetary Policy Committee (MPC) decided to keep the overnight deposit rate, overnight lending rate, and the main operation rate unchanged at 19.25 percent, 20.25 percent, and 19.75 percent, respectively. The discount rate was also held steady at 19.75 percent.
The MPC cited global economic slowdown and reduced international commodity prices, particularly in energy, as factors influencing its decision. While global inflationary pressures have eased due to monetary policy tightening in advanced and emerging economies, geopolitical tensions in the region pose uncertainty, especially regarding energy prices.
On the domestic front, Egypt’s annual headline inflation reversed its upward trend, recording 34.6 percent in November 2023, down from 35.8 percent in October. Core inflation continued to decelerate for the fifth consecutive month, reaching 35.9 percent in November. The country’s real GDP growth slowed to 2.9 percent in the second quarter of 2023, attributed to a contraction in gross domestic investments.
Looking ahead, the MPC expects Egypt’s real GDP growth to slow further in the 2023/2024 financial year before gradually picking up. Despite stable unemployment rates, the central bank reiterated its commitment to maintaining a sufficiently restrictive monetary stance to preserve the decelerating trend of underlying inflation and achieve medium-term price stability. The path of future policy rates will be guided by forecasted inflation rather than prevailing rates, with a focus on assessing risks surrounding the inflation outlook.
