The Central Bank of Egypt’s (CBE) Monetary Policy Committee (MPC) has opted to maintain its overnight interest rates, citing the persistent headwinds of global economic and inflationary uncertainty. The decision, largely anticipated by market analysts, leaves deposit and lending rates unchanged at 27.25 per cent and 28.25 per cent respectively, with the discount rate also holding steady at 27.75 per cent.
In its official statement, the MPC acknowledged the divergent approaches of global central banks, noting that while some have pursued gradual easing, others remain cautious amid evolving economic conditions.
The committee highlighted that while domestic economic growth remains broadly stable and is projected to continue at the current pace into the medium term, it has yet to fully recover to pre-pandemic levels.
Crucially, the MPC underscored the risks to this outlook, particularly the potential dampening effect of the current restrictive monetary policy stance on domestic demand, as well as the resurgence of global protectionist trade policies.
Despite a marginal dip in urban inflation to 24 per cent in January from 24.1 per cent the previous month, according to data from the Central Agency for Public Mobilization and Statistics (CAPMAS), the MPC signaled its concern about upward risks to the inflation outlook.
The committee specifically pointed to the increasingly uncertain global and regional landscape, citing the potential impact of US trade policies and geopolitical tensions. Notably, the CBE has refrained from raising interest rates to combat inflationary pressures, instead deploying corridor-linked deposits to absorb excess liquidity within the local banking sector.
Policy determinants
The key determinants of Egyptian monetary policy remain market sentiment, inflationary pressures, and the foreign exchange rate. The CBE continues to prioritize stabilizing the local currency, which averaged LE50.5 against the US dollar last week, according to CBE data.
The dollar itself has experienced broader losses globally, as investors reduce their long positions amid growing uncertainty surrounding US trade policy and a less hawkish Federal Reserve.
Market consensus suggests the MPC may initiate a gradual monetary easing cycle at its next meeting on April 17, with potential rate cuts of up to 200 basis points. This anticipated move reflects a delicate balancing act for the CBE, navigating domestic economic realities while remaining attuned to the volatile global financial landscape.
