Egypt’s monetary authority announced a reduction in its benchmark interest rates on Thursday, trimming rates by a combined 100 basis points as part of an ongoing easing cycle. The central bank said it lowered the overnight deposit rate from 20% to 19% and the overnight lending rate from 21% to 20%.
The cut was in line with the consensus among analysts and comes against a backdrop of moderating inflation. Official figures for January show annual urban consumer inflation at 11.9%. Core inflation, which excludes more volatile components such as food and fuel, eased to 11.2% year on year in January, down from 11.8% in December.
Officials framed the adjustment as a continuation of policy loosening prompted by the recent decline in measured inflation. The central bank's statement set the new overnight rates at 19% for deposits and 20% for lending, reflecting a one percentage point reduction across the board from the prior levels.
Market commentators had largely anticipated this move, with the cut aligning with the majority of analyst expectations. The decision follows the January inflation readings, which showed both headline and core measures trending lower compared with the previous month.
Summary
- The central bank reduced the overnight deposit rate to 19% from 20% and the overnight lending rate to 20% from 21%.
- The policy action reflects a 100 basis point reduction and is described as part of a continued monetary easing cycle.
- January inflation data showed headline urban consumer inflation at 11.9% and core inflation at 11.2%, down from 11.8% in December.
Key points
- Rate cut magnitude: A 100 basis point reduction in the central bank's key overnight rates.
- Inflation trend: Headline inflation recorded at 11.9% in January; core inflation declined to 11.2% from 11.8% in December.
- Market expectations: The decision was consistent with what most analysts had predicted.
Risks and uncertainties
- Inflation remains at double-digit levels despite recent declines, indicating sustained price pressures in the economy.
- Further monetary policy direction depends on future inflation readings and their trajectory beyond January, which are not covered in the available data.
The central bank's statement outlined the new overnight deposit and lending rates without providing additional guidance beyond the rate action itself. The move marks another step in the authority's easing cycle as reported inflation measures for January showed a moderation in both headline and core metrics.