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Egypt keeps rates steady to tackle ‘future’ inflation

Egypt interest rates Reuters/Mohamed Abd El Ghany
The economy grew by an annual 3.9% in the last quarter of 2022 as well as the first quarter of 2023

Egypt’s central bank, as widely expected, left its overnight interest rates unchanged on Thursday, saying it was focused on future rather than present inflation and that economic growth appeared to have been stable in the July-September quarter.

The central bank’s monetary policy committee (MPC) left the lending rate at 20.25 percent and the deposit rate at 19.25 percent, it said in a statement.

The median forecast in a poll of 16 analysts had been for the MPC to leave rates steady. Three analysts had expected a hike of 100 basis points (bps).

Many analysts believe that despite inflation that surged to a record 38 percent in September the central bank will leave both interest rates and the currency exchange rate against the dollar unchanged until after a presidential election set for mid-December.

“The MPC decided to keep policy rates unchanged and to continue assessing the cumulative impact of previously enacted tightening policies and its transmission to the economy in a data-driven manner,” the MPC statement said.

“The MPC reiterates that the path of future policy rates remains a function of forecasted inflation rather than prevailing inflation rates.”

It added that growth appeared to have slowed in the financial year that ended in June and had remained at a reduced pace in the July-September quarter.

“Leading indicators for 2023 Q3 suggest a general stability in economic activity compared to 2023 Q2,” the MPC said, without saying what second quarter growth had been.

The economy grew by an annual 3.9 percent in the last quarter of 2022 as well as the first quarter of 2023, it said, down from 6.7 percent in fiscal 2021/22.