The Egyptian central bank will lower interest rates by 100 basis points
In order to boost growth as inflation declines, Egypt’s central bank is anticipated to lower its benchmark interest rates by 100 basis points on Thursday, according to a Reuters poll.
According to the median prediction of eight economists polled, the Central Bank of Egypt (CBE) will reduce its lending rate to 24% and its overnight deposit rate to 23% during its Monetary Policy Committee meeting on August 28. Presently, the rates are 24% and 25%, respectively.
Aya Zoheir of financial consulting firm Zilla Holding stated that the U.S. Federal Reserve is also anticipated to reduce interest rates in September. “Inflation has been declining while the Egyptian pound is strengthening against the U.S. dollar, supported by government initiatives to lower commodity prices and the stability of energy prices,” Zoheir said.
According to data released by the statistics office CAPMAS on August 10, monthly urban consumer inflation decreased by 0.5%, while annual inflation decreased to 13.9% in July from 14.9% in June due to declining prices for meat, poultry, fruit, and vegetables. The central bank said that core inflation increased little from 11.4% to 11.6%.
“This paves the way for the CBE to cut interest rates by a conservative estimate of 1% or 2%,” Zoheir said.
After reaching a peak of 38% in September 2023, Egypt’s inflation rate has been declining ever since. The CBE allowed the market to determine the local currency exchange rate in March 2024 with the assistance of a $8 billion International Monetary Fund bailout package. At the time, the bank raised interest rates in an effort to tighten monetary policy and halt the anticipated rise in inflation for nearly a year.
In an effort to ease some of the post-devaluation tightening, the CBE has been progressively reducing its interest rates since April of this year. These rates have been set since March 2024.
A substantial currency adjustment and a significant rate hike on March 6 were followed by a 100 basis point drop on May 22 and a 225 basis point cut on April 17.
The bank halted a trend of rate reductions after an increase in inflation by maintaining benchmark interest rates at its most recent MPC meeting on July 10.
