In a steadfast decision, the Central Bank of Egypt (CBE) has opted to maintain its current interest rates for the seventh consecutive time, marking a significant stance in its first assembly of 2025. The overnight deposit rate remains at 27.25%, the overnight lending rate at 28.25%, and the main operation rate steady at 27.75%. Similarly, the discount rate has been preserved at 27.75%.
The Monetary Policy Committee (MPC) of the CBE highlighted that this decision embodies a cautious strategy, carefully balancing domestic economic rejuvenation against enduring inflationary pressures and global uncertainties. While some central banks globally have started reducing rates, others, like Egypt’s, remain wary due to unpredictable commodity prices, geopolitical dynamics, and the looming impacts of U.S. protectionist trade approaches.
Initial figures for the last quarter of 2024 suggest a strong acceleration in Egypt’s economic growth, buoyed by robust manufacturing and transportation sectors. The nation’s unemployment rate has also shown improvement, dropping to 6.4% from 6.7% in the previous quarter. Nevertheless, the real gross domestic product still lags behind its potential, endorsing a short-term disinflationary trend.
As of January 2025, annual headline inflation steadied at 24%, with core inflation rounding off at 22.6%. While food inflation has eased to 20.8%, non-food inflation remains persistently elevated at 25.5% on average throughout 2024. Factors such as global commodity price fluctuations and regional geopolitical tensions continue to amplify the upward risks to inflation.
Despite these challenges, the CBE remains optimistic, anticipating a significant decline in inflation in early 2025, aided by monetary tightening and beneficial base effects. However, it cautions that fiscal tightening might slow the rate of disinflation later in the year.
The CBE underscores the appropriateness of current rates to maintain a stringent monetary posture and stabilize inflation expectations. The prospect of future rate reductions will hinge on ongoing inflation trends and the overall risk landscape.
“The MPC stands ready to deploy all available tools to secure price stability,” asserted the CBE, reaffirming its dedication to guiding inflation towards its target while fostering economic growth.
