Egypt Holds Key Rate Even as Inflation Shows Signs of Easing
Egypt’s held its benchmark interest rate steady on Thursday, opting to keep it at a record high even as double-digit inflation eased to its lowest level in two years.
The Monetary Policy Committee kept the benchmark deposit rate at 27.25% and the lending rate at 28.25%. The decision was in line with expectations, with all but one of 11 economists surveyed by Bloomberg predicting no change.
Most economists see Egypt waiting until the end of the first quarter at the earliest before a rate cut.
Inflation has been a key focus for the central bank, particularly as authorities navigate the challenges of implementing an $8 billion International Monetary Fund program that calls for spending and subsidy cuts, while boosting private-sector growth.
“The MPC deems the deferment of the previous targets as appropriate, extending the target horizons to Q4 2026 and Q4 2028 at 7 percent (± 2 p.p.) and 5 percent (± 2 p.p.) on average, respectively,” it said in a statement.
“The deferment will allow for more room to weather price shocks without requiring further stringent monetary tightening, thereby avoiding substantial slowdown in economic activity,” the regulator said. “In view of the above, the Committee judges that the current policy rates remain appropriate to maintain a tight monetary stance until a significant and sustained decline in inflation is achieved, and expectations are firmly anchored.”
The IMF loan was part of a $57 billion global bailout reached in early 2024 that helped ease Egypt’s worst economic crisis in decades.
But untangling the problems that besest Egypt over the past couple of years is neither quick nor easy. High price increases have hit the nation of 107 million hard and heaped pressure on authorities. Consumer prices eased slightly in November, with the inflation rate falling to 25.5% even after a new round of fuel and electricity price hikes.
A recent weakening in Egypt’s pound, stemming at least in part from seasonal portfolio outflows, could further stoke inflationary pressures. The currency plunged about 40% in March and began another slide in recent weeks, crossing the milestone of 50 per dollar this month to trade at a record low.
