CBE expects to maintain interest rates amid falling inflation
(MENAFN) The Central bank of Egypt is anticipated to keep its overnight deposit and lending rates unchanged at its upcoming monetary policy committee meeting on Monday, according to a poll of analysts. This expectation follows the bank's decision to maintain interest rates steady during its last two meetings on July 18 and May 23. The bank has indicated that while economic growth remains sluggish, inflation has been trending downward. Earlier this year, on March 6, the bank had implemented a significant interest rate hike of 600 basis points as part of an expanded USD8 billion loan agreement with the International Monetary Fund (IMF), accumulating a total increase of 800 basis points since the start of the year.
The median forecast from a group of 15 analysts suggests that the central bank will hold its deposit rate at 27.25 percent and its lending rate at 28.25 percent during the next meeting. Only one analyst predicts a potential rate cut of 100 basis points. According to James Swanston of Capital Economics, the central bank is likely to maintain its current rates due to inflation still being well above its target. However, with inflation expected to decrease significantly by early 2025, attention will shift towards the timing of the first rate cut, which Capital Economics has projected for the first quarter of 2025. As of July, inflation had declined to 25.7 percent, surpassing the inflation rate with the real interest rate for the first time since January 2022, down from a peak of 38 percent in September and 27.5 percent in June.
The central bank has set a target of reducing inflation to less than 9 percent by the end of 2024. As part of its agreement with the IMF, Egypt had previously allowed the exchange rate to float, resulting in a depreciation of the pound to less than 50 pounds to the dollar, down from a fixed rate of 30.85 pounds. Currently, the pound is trading at approximately 48.6 to the dollar.
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