The Monetary Policy Committee decides to keep key interest rates unchanged
Cairo, Egypt — The Monetary Policy Committee of the Central Bank of Egypt decided at its meeting on Thursday, October 17, 2024, to maintain the overnight deposit and lending rates and the Central Bank’s main operation rate at 27.25%, 28.25%, and 27.75%, respectively. It also decided to keep the credit and discount rates at 27.75%. This decision reflects the latest developments and expectations at the global and local levels since the previous meeting of the Monetary Policy Committee.
Globally, monetary tightening policies in developed and emerging market economies have contributed to lower inflation globally, as some central banks have continued to cut yield rates as inflation approaches its target levels. While the rate of economic growth is largely stable, its prospects remain vulnerable to downside risks due to the negative impact of restrictive monetary policies on economic activity. In addition, upside risks remain surrounding the inflation path given the volatility witnessed in global prices of major commodities, especially energy, due to supply chain disruptions resulting from geopolitical tensions and unfavorable weather conditions.
On the domestic side, the real GDP witnessed a growth of 2.4% in the second quarter of 2024 compared to about 2.2% in the first quarter of 2024, which indicates a slowdown in growth during the fiscal year 2023/2024 to 2.4% compared to about 3.8% during the year. Fiscal 2022/2023. The slight increase in the second quarter of 2024 is due to the increasing contributions of the non-petroleum manufacturing sector, construction, and trade to the gross domestic product. Initial indicators for the third quarter of 2024 indicate that real economic activity is gradually recovering, and it is expected to reach its maximum capacity by the fiscal year 2025/2026. Estimates indicate that real GDP is still below its maximum capacity, which supports the expected downward path of inflation during the coming period.
The data indicate that the annual rate of general and core inflation stabilized at approximately 26.4% and 25.0%, respectively, in September 2024. Non-food goods are the main driver of inflation during the months of August and September 2024 as a result of the measures taken by the state to control public financial conditions, which led to Limiting the positive impact of the gradual decline in the impact of previous shocks, the decline in food commodity inflation, and the positive impact of the base period. The gradual decline in food commodity inflation, along with the improvement in inflation expectations since the beginning of the year, indicates that inflation continues on its downward path, although its pace is restricted by measures to adjust public financial conditions.
Expectations indicate that inflation will stabilize at its current levels until the fourth quarter of 2024, although it is surrounded by some upside risks, including the continuation of regional tensions, the rise in global prices of basic commodities, and the possibility that public financial control measures will have an impact that exceeds expectations. The inflation rate is expected to decline starting from the first quarter of 2025 as the cumulative impact of monetary tightening decisions and the positive impact of the base period are achieved.
In light of the above and based on the decisions of the Monetary Policy Committee in its previous meetings, the Committee believes that keeping the central bank’s basic interest rates unchanged is appropriate in the current period until the inflation rate decreases significantly and sustainably. The Committee indicates that it will continue to follow a data-driven approach to determine the appropriate level and duration of monetary tightening based on its assessment of inflation expectations, the development of monthly inflation rates, and the effectiveness of the monetary policy transmission mechanism. The Committee will not hesitate to use all available monetary policy tools to enhance the downward path of inflation and achieve price stability in the medium term.
monetary policy sector
monetary.policy@cbe.org.eg