Egypt's Central Bank Maintains Interest Rates Amid Falling Inflation
In a strategic move, Egypt's central bank is expected to keep its interest rates unchanged at its upcoming monetary policy meeting scheduled for Thursday. According to a recent Reuters poll, the deposit rate is anticipated to remain at 27.25% while the lending rate stays at 28.25%. This decision comes as inflation continues to show a downward trend, dropping to 25.7% in July, marking the first positive real interest rate since January 2022. The central bank's cautious stance is supported by two previous meetings where rates were held steady, reflecting slow economic growth and low inflation.
Earlier in the year, the central bank had raised interest rates by a total of 800 basis points as part of an $8 billion agreement with the International Monetary Fund (IMF). This aggressive strategy aimed to combat soaring inflation, which peaked at 38% in September. Analysts predict that with inflation expected to decline further into early 2025, the central bank will likely maintain its current rates until at least the first quarter of 2025, when a potential rate cut may be on the horizon. James Swanston of Capital Economics noted, “We expect the MPC to keep rates on hold as inflation remains well above target.”
In addition, the Egyptian government has allowed the local currency to depreciate to less than 50 pounds to the dollar as part of its agreement with the IMF, a significant shift from the previously fixed rate of 30.85 pounds. This adjustment has seen the Egyptian pound's value drop to around 48.6 pounds to the dollar, further influencing economic conditions in the country.
