Central Bank of Egypt Cuts Interest Rates by 100 Basis Points
Rate Cut Details
The Central Bank of Egypt reduced key interest rates by 100 basis points on Thursday. The Monetary Policy Committee (MPC) lowered the overnight deposit rate to 24%. It also cut the overnight lending rate to 25%, marking the second cut this year. This follows a year of unchanged rates and a 600 basis point hike in March 2024. Officials aim to support domestic demand and control inflation without destabilizing financial markets.
Market Expectations and Reaction
Analysts expected a sharper rate cut of 175 basis points, according to a Reuters poll.Despite this, the Central Bank of Egypt opted for a more cautious 100 basis point cut. The MPC stated this decision balances economic risks with the need to support growth. Egypt’s financial markets responded cautiously, watching for further signals from the central bank.
Growth and Inflation Outlook
Egypt’s economy grew 5.0% in Q1, up from 4.3% in Q4 2024. The bank expects stronger growth in the next financial year. Annual headline inflation dropped to 12.8% in February due to a base effect. Inflation rose to 13.9% in April but remains lower than 2024 peaks. Consumer spending and investment activity are expected to rise as inflation gradually cools.
Policy and Future Projections
The MPC expects inflation to continue falling through 2025 and 2026. Fiscal consolidation and non-food inflation may slow the pace of disinflation. The Central Bank of Egypt views the rate cut as supportive of its easing strategy. It aims to control inflation while supporting stable economic growth. Policymakers remain ready to act swiftly if inflation trends change unexpectedly.
Monetary Trends and Currency Strategy
Money supply (M2) growth slowed to 25.8% in March from 33.9% in February. The Central Bank of Egypt allowed the pound to weaken in March under IMF terms. These measures align with Egypt’s $8 billion IMF program and UAE investment deal. Currency flexibility and prudent policy remain key pillars of Egypt’s monetary framework.
Conclusion
The Central Bank of Egypt remains focused on managing inflation and boosting growth. Its latest rate cut shows a balanced approach to monetary policy amid global uncertainty.