Egypt's Central Bank is expected to keep interest rates unchanged at its upcoming meeting on September 24. According to Hani Abu Al-Futoh, a banking expert, the bank's Monetary Policy Committee will likely maintain the current deposit rate of 19.00% and lending rate of 20.00%. This decision comes amid a decline in urban inflation and a simultaneous increase in core inflation.
The urban inflation rate in Egypt decreased to 14.5% in August from 14.9% in July, while core inflation rose to 14.9% from 14.7% during the same period. The monthly urban inflation rate was 0.1% in August, compared to 0.0% in July. These numbers indicate that while the general inflation rate is decreasing, core inflation is still on the rise.
Hani Abu Al-Futoh notes that the current inflation rate is still above the Central Bank's target range of 7% ±2 percentage points. The expert believes that the decline in general inflation is due to volatile price elements, while the underlying pressure on prices is still increasing. This is reflected in the core inflation rate, which rose to 14.9% in August.
The Egyptian Central Bank's foreign exchange reserves stood at $57.214 billion at the end of August, providing a buffer against potential economic shocks. However, the country's net foreign assets in the banking system were approximately $27.9 billion in July. These numbers indicate that Egypt's economy is still facing challenges in managing its foreign exchange resources.
The country's public debt stands at 83.8% of GDP, which poses risks to debt servicing and limits the government's spending capacity. Any further decline in the value of the Egyptian pound could lead to higher import costs and increased prices for goods. Additionally, rising global energy prices due to regional tensions could have a negative impact on the economy.
Hani Abu Al-Futoh predicts that the Central Bank will keep interest rates unchanged, with a 70% probability. This scenario assumes that the urban inflation rate will remain relatively stable, while core inflation continues to rise. The expert also notes that the International Monetary Fund (IMF) expects the general inflation rate to reach 16.7% in the second half of 2026.
The decision to maintain interest rates is seen as a balancing act between high urban inflation and rising core inflation. If the inflation rate continues to rise, the Central Bank may consider raising interest rates. However, if the inflation rate declines, the bank may consider cutting interest rates. The expert believes that keeping interest rates unchanged is the most likely scenario.
Key points
- The Egyptian Central Bank is expected to keep interest rates unchanged at its upcoming meeting on September 24.
- The country's inflation rate is still above the Central Bank's target range.
- The Central Bank's decision is seen as a balancing act between high urban inflation and rising core inflation.
