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Egypt's central bank kept its overnight interest rate unchanged on Thursday, as expected, saying economic growth remains slow but inflation is falling.
The bank's Monetary Policy Committee (MPC) kept deposit rates unchanged at 27.25% and lending rates at 28.25%.
All but one of 18 analysts polled by Reuters expected rates to remain unchanged, with only one forecasting a 100 basis point cut.
The decision keeps the overnight deposit rate below headline inflation, which stood at 27.5% in June. Real interest rates have been negative since January 2022. Inflation fell for a fourth consecutive month in June after surging to a record 38% in September.
The MPC expects inflation to fall sharply in the first half of 2025.
“The gradual moderation in food inflation and improving inflation expectations suggest that inflation is on a sustained downward trend,” the MPC said.
The policy committee added that gross domestic product (GDP) growth slowed slightly to an annualized rate of 2.2% in the first quarter of 2023 from an annualized rate of 2.3% in the fourth quarter of 2023.
“Leading indicators for the second quarter of 2024 suggest that economic activity remains subdued. As a result, real GDP growth is expected to slow in 2023/24 compared to the previous year before recovering in 2024/25,” the report said.
Egypt reported GDP growth of 3.8% for 2022/23.
The central bank raised interest rates by 600 basis points on March 6 as part of an agreement with the IMF, bringing the total increase since the beginning of the year to 800 basis points. Egypt also significantly devalued its currency against the dollar in accordance with the agreement with the IMF.