Egypt central bank cuts benchmark rate to 22% (est. 23.00%)

Egypt central bank cuts benchmark rate to 22% (est. 23.00%)

In a move aimed at bolstering economic growth and supporting inflation cooling, Egypt's central bank is set to reduce its key interest rates by 100 basis points. The Central Bank of Egypt (CBE) is expected to lower its overnight deposit rate to 23% and its lending rate to 24% at its August 28 Monetary Policy Committee meeting. This decision follows a Reuters poll that indicated a median forecast of eight economists surveyed for such a rate cut [1].

The decision to cut rates comes as Egypt's inflation has been declining. Annual urban consumer inflation eased to 13.9% in July from 14.9% in June, driven by falling meat, poultry, fruit, and vegetable prices. Monthly inflation also slipped by 0.5% [1]. Core inflation edged up to 11.6% from 11.4% [1]. These developments have paved the way for the CBE to cut interest rates by a conservative estimate of 1% or 2% [1].

The CBE has been gradually lowering its interest rates since April 2024, following a sharp hike in March 2024 that accompanied a steep currency adjustment. The bank cut rates by 225 basis points on April 17 and by 100 basis points on May 22. The bank kept key interest rates unchanged in its latest MPC meeting on July 10, pausing the trend of rate reductions following an uptick in inflation [1].

The CBE's decision to cut rates is part of a broader effort to support economic growth and stabilize the Egyptian pound, which has been strengthening against the U.S. dollar. The bank's action is also influenced by the expected rate cuts by the U.S. Federal Reserve in September [1].

References:
[1] Reuters. (n.d.). Egypt central bank set to cut rates by 100 basis points. Retrieved from https://www.marketscreener.com/news/egypt-central-bank-set-to-cut-rates-by-100-basis-points-ce7c50dbd088f32c