Egypt's central bank (CBE) held its key interest rates steady on Thursday. The overnight deposit rate remains at 27.25 per cent, the overnight lending rate at 28.25 per cent, and both the main operation and discount rates are unchanged at 27.75 per cent. The Monetary Policy Committee's (MPC) decision reflects continued global economic uncertainty, with central banks worldwide taking different approaches to interest rates. While some are easing, others remain cautious due to inflation and geopolitical tensions. Although global commodity prices have fluctuated, they are expected to rise, especially for grains, given the current geopolitical risks and trade disruptions. "Upside risks surrounding the inflation outlook have increased compared to the previous MPC meeting. This is due to the increasingly uncertain global and regional outlook regarding the impact of U.S. protectionist trade policies and geopolitical tensions." MPC statement read. Economic Growth on the Rise Domestically, preliminary data for the fourth quarter of 2024 indicates an accelerated pace of economic activity compared to the 3.5 per cent growth in the third quarter of 2024, driven by increased contributions from the manufacturing and transportation sectors. Egypt's unemployment rate also improved, declining from 6.7 per cent in the third quarter to 6.4 per cent in the fourth quarter. Inflation Trends and Future Outlook Annual inflation slowed in the second half of 2024 but remained high at 24.0 per cent in January 2025. Core inflation held steady at 22.6 per cent, with food inflation easing to 20.8 per cent, while non-food inflation remained sticky at around 25.5 per cent throughout 2024. Despite heightened risks from global economic shifts and regional geopolitical tensions, headline inflation is projected to decline significantly in the first quarter of 2025, driven by monetary tightening and a favourable base effect. However, fiscal measures could slow the pace of disinflation, keeping underlying inflation elevated over the medium term. A Cautious Path Forward The MPC emphasised that maintaining the current policy stance is necessary to ensure inflation expectations remain anchored and to support the projected disinflation path. The timing for potential interest rate cuts will be assessed on a meeting-by-meeting basis, depending on evolving economic conditions. The committee reaffirmed its commitment to monitoring financial and economic developments and pledged to use all available tools to achieve price stability, ensuring inflation moves towards its target while containing demand-side pressures and supply-driven shocks. Subediting: Y.Yasser Download
