The Central Bank of Egypt keeps interest rates unchanged despite increasing inflation

The Central Bank of Egypt keeps interest rates unchanged despite increasing inflation

The Central Bank of Egypt (CBE) announced on Thursday that it will not change its main interest rates. This decision comes as inflation rose for the third month in a row in October, partly due to higher fuel prices.

Steady rate

The Central Bank of Egypt (CBE) decided to keep key interest rates the same. The overnight deposit rate is 27.25%, the overnight lending rate is 28.25%, and the main operations rate is 27.75%. The discount rate also stayed at 27.75%. This is the fifth time in a row that rates have not changed.

The bank said it believes these rates are suitable for now, based on local and global economic conditions, until inflation shows a clear and lasting drop.

The Monetary Policy Committee (MPC) will keep relying on economic data to decide how long these rates should remain restrictive, focusing on inflation trends and how well monetary policies are working.

So far this year, the CBE has raised interest rates by 8 percentage points, increasing them by 19% since it started tightening monetary policies in March 2022.

Inflation Overview

In October, Egypt’s annual urban consumer price inflation increased slightly to 26.5% from 26.4% in September, marking the third consecutive month of rising inflation, according to CAPMAS.

The main driver was a 27.3% rise in food and beverage prices, along with a 9.2% increase in fuel prices during October. This was the third fuel price hike this year as the government works to reduce subsidies.

Due to the inflation trend, experts predict that the Central Bank of Egypt (CBE) is unlikely to lower interest rates before early 2025.

Meanwhile, Egypt’s net international reserves grew to $46.9 billion at the end of October, up from $46.7 billion in September, based on CBE data.

Rating action

Fitch, a rating agency, raised Egypt’s Long-Term Foreign-Currency Issuer Default Rating (IDR) from ‘B-‘ to ‘B’ earlier this month. This upgrade was due to stronger external finances, thanks to foreign investment in Ras Al Hekma, higher international reserves, new capital inflows, and more flexible exchange rates. The outlook remains stable.

Published: 22th November 2024

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