The Central Bank of Egypt on Thursday left overnight interest rates unchanged as expected and said that despite the slowdown in economic growth, higher inflation in the prices of non-food commodities limited the impact of the continuing decline in food commodity inflation.
The Central Bank Monetary Policy Committee meeting was the first since Egypt signed a financial support agreement worth eight billion dollars with the International Monetary Fund last March, when it raised interest rates by 600 basis points.
The Monetary Policy Committee said in a statement that it left the overnight lending rate at 28.25 percent and the overnight deposit rate at 27.25 percent unchanged.
This fixation was widely expected, as only one analyst out of 19 in a Reuters poll expected the Monetary Policy Committee to cut interest rates.
Interest rates are still well below the inflation rate in Egyptian cities, which reached 32.5 percent in April. Inflation has declined from a record high of 38 percent in September.
The Monetary Policy Committee said in a statement accompanying the interest rate decision, “Expectations indicate that inflation will moderate during 2024 as inflationary pressures subside, especially since it has already reached its peak.”
The committee added that economic growth slowed to 2.3 percent in the fourth quarter of 2023 from 4.2 percent in the same period a year ago, and that indicators indicate continued weak growth in the first quarter of 2024.
The Central Bank raised interest rates on March 6 as part of its agreement with the International Monetary Fund, bringing the total increases since the beginning of the year to 800 basis points.
As part of the IMF agreement, Egypt allowed its currency to fall below 50 to the dollar after fixing it at 30.85 for a year. The price of the Egyptian pound has since risen to about 47.1 pounds to the dollar. (Reuters)