The Central Bank of Egypt (CBE) kept its key interest rates unchanged on 23 May 2024, with its Monetary Policy Committee (MPC) leaving the overnight deposit rate at 27.25% and the overnight lending rate at 28.25%.
The decision came after Egypt signed an expanded US$8bn loan agreement with the International Monetary Fund in March and, in February, a US$35bn deal with UAE sovereign fund ADQ for the development rights to Ras El-Hekma on the Mediterranean coast.
INFLATION EASING
According to the MPC, annual headline and core inflation peaked at 38% in September 2023 and 41% in June 2023 respectively. The deceleration was sustained despite an unexpected surge in February 2024, when annual urban headline inflation rose to 35.7%, and headline and core inflation fell to 32.5% and 31.8% respectively in April 2024.
The committee noted that food items had driven higher inflation since December 2022, although the steady unwinding of annual food inflation had been partly offset by rising non-food inflation since November 2023. It said inflation was expected to decline significantly in the first half of 2025, reflecting the combined impact of recent monetary policy tightening, the unification of the foreign exchange market and favourable base effects.
GROWTH SLOWS
Real GDP growth slowed to 2.3% in the fourth quarter of 2023, reflecting a weaker contribution from industry, and indicators for the first quarter of 2024 suggested that activity would remain subdued. According to the MPC, real economic activity was expected to pick up in the 2024/25 fiscal year.