Central bank delivers no surprises on rates: The Central Bank of Egypt left interest rates unchanged after its Monetary Policy Committee met on Thursday, it said in a statement (pdf), citing steady but subdued economic growth and sticky inflation, along with external risks tied to global monetary tightening and geopolitical tensions. “The current policy stance remains appropriate until a significant and sustained decline in inflation materializes,” the bank said.

Where rates stand: The Monetary Policy Committee (MPC) has kept the overnight deposit rate at 27.25%, the overnight lending rate at 28.25%, and the main operation and discount rates at 27.75%.

March’s jumbo rate hike still holds the line: Rates have remained unchanged since the committee delivered a 600 bps rate hike following a surprise monetary policy meeting in March in conjunction with the float of the EGP and a larger loan package from the IMF being approved soon after. Rates have now remained unchanged for five consecutive MPC meetings — the committee left rates untouched when it met in May, July, September, October, and most recently on Thursday.

The global inflationary cooldown remains precarious: While tighter monetary policies have driven inflation down in many advanced and emerging markets, central banks are sticking to restrictive stances to ensure disinflation holds steady, the CBE noted. Despite broadly stable economic growth, risks persist, including the dampening effects of tighter policies, geopolitical tensions, and potential trade protectionism. Meanwhile, forecasts for energy prices have moderated, but remain vulnerable to supply shocks from trade disruptions and extreme weather, keeping inflation risks tilted to the upside.

We’re still running under capacity: Egypt’s economy showed signs of recovery in 3Q 2024, with GDP growth accelerating past the 2.4% logged in 2Q and projections for 4Q showing further improvement, but it remains below potential, supporting a near-term disinflationary outlook, according to the bank. Unemployment ticked up to 6.7% from 6.5%, as job creation struggled to keep pace with new labor market entrants.

The overall picture isn’t bleak: Annual headline inflation held steady at 26.5% in October, marking three consecutive months of relative rate stability and reflecting the lowest food inflation rate in two years at 27.3%, the statement read. The bank pointed to “the gradual normalization of monthly inflation dynamics” and improved inflation expectations as evidence that inflation “will continue its declining course,” though it cautioned that upside risks remain due to fiscal measures, geopolitical tensions, and global trade disruptions. The CBE expects inflation to stabilize through year-end, before easing further in 1Q 2025.

No surprises here: All nine analysts and economists polled byEnterpriseAM forecast the CBE’s decision to keep rates unchanged, citing persistent inflationary pressures driven by rising fuel prices and ongoing regional geopolitical tensions. Most of the analysts we spoke to see inflationary pressures ticking up again in November, driven by energy price hikes and the rise in tobacco prices.

But the central bank could move to cut rates in the months to come, think analysts: Most analysts predict that the central bank will start cutting rates in the first quarter of next year, including Dina El Wakkad, who cited a more “favorable base effect and a more relaxed global monetary environment.”

From the international desk: The decision to hold rates steady aligns with expectations tied to Egypt’s fourth IMF review, which could unlock a USD 1.3 bn loan tranche, according to Bank of America’s Jean-Michel Saliba, Bloomberg reports. EFG Hermes’ Mohamed Abu Basha adds that the focus remains on taming inflation to create space for rate cuts next year as price pressures ease, Abu Basha told Bloomberg separately.

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