Egypt keeps interest rates steady as inflation looms

Reuters/Mohamed Abd El Ghany

Egypt’s central bank kept its key overnight interest rates unchanged on Thursday, as expected, citing the impact on inflation of uncertainty around US protectionism and geopolitics.

The bank’s monetary policy committee kept the lending rate at 28.25 percent and the deposit rate at 27.25 percent, it said.

The median forecast in a Reuters poll of 10 analysts was that the committee would keep rates steady.

“Upside risks surrounding the inflation outlook have increased due to the increasingly uncertain global and regional outlook regarding the impact of US protectionist trade policies and geopolitical tensions,” the central bank said in a statement.

Maintaining rates in that environment “will ensure the realisation of the projected disinflation path, and firmly anchor inflation expectations,” it added.

The statement noted that headline inflation, which has been trending downwards since hitting a record high of 38 percent in September 2023, was expected to continue to decline “substantially” in the first quarter of the year as a result of monetary policy tightening and a favourable base effect.

Egypt’s headline inflation dipped to 24 percent in January.

The central bank said economic activity grew faster in the last quarter of 2024 according to initial indicators than the 3.5 percent recorded in the quarter prior, “indicating sustained recovery in economic activity” driven by manufacturing and transportation.

“While estimates for the output gap indicate that real GDP remains below potential, supporting the disinflation path over the short term, it is expected that the economy will gradually move closer to its full potential by end of FY 2025-26,” the central bank said.