The Central Bank of Egypt kept its interest rate unchanged at a record high of 27.25% on Thursday (Nov. 21), a decision correctly predicted by all eight economists surveyed by Bloomberg. The hold was the fifth consecutive hold and followed a cumulative hike of 1,900 basis points since March 2022.
“Considering developments at the domestic and global levels, the committee views the current monetary policy stance as appropriate until a significant and sustained decline in inflation materialises,” the bank’s monetary policy committee (MPC) said in a statement.
Annual headline inflation edged up for a third straight month to 26.5% in October, while core inflation eased to 24.4%, and food inflation dropped to a two-year low of 27.3%.
“The inflation is expected to persist near current levels till the end of 2024 with the balance of risks still tilted to the upside. These risks include geopolitical tensions, possible trade protectionism, and higher-than-anticipated pass-through of fiscal measures. Nevertheless, inflation is projected to ease appreciably starting Q1 2025, as the cumulative impact of monetary policy tightening and favourable base effect materialize,” the MPC statement read.
Real GDP growth accelerated in Q3 2024 compared to 2.4% in Q2, up from 2.2% in Q1 with further gains anticipated in Q4, although output remains below potential.
“Projections for Q4 2024 show that while economic activity continues to pick up, estimates indicate that real GDP remains below potential, thereby supporting the expected disinflation path over the short term,” the MPC statement said.
Growth for the full fiscal year to end-June slowed to 2.4% from 3.6% in 2022/23. The unemployment rate ticked up marginally to 6.7% in Q3 of 2024 compared to 6.5% in Q2 of 2024.
The next MPC meeting will convene on Dec. 26. All of Focus Economics panelists, bar one, expect the CBE to hold again at its next and final meeting of 2024; in calendar year 2025, the Consensus is for over 1,000 basis points of cuts. Meanwhile, Fitch Ratings has projected that the CBE will begin easing its monetary policy in 2025.
Earlier this week, the CBE approved a new feature allowing users in Egypt to receive international money transfers through the InstaPay app.
