On Thursday, Egypt’s central bank cut its main interest rates by 2 percentage points, representing the third rate on hold this year caused mainly by lower inflation and encouraging economic growth with an annualized rate of 5.4% for the second quarter of 2024.
The Monetary Policy Committee pegged the deposit rate at 22% and the lending rate at 23%, which was beyond what the economists anticipated i.e., a reduction of 1%.
The second quarter economic growth picked up its pace from 4.8% in the first quarter, mainly because of the rise in tourist inflows and production of the non-oil sector.
The Central Bank’s statement quoted the updated assessments of inflation dynamics since the July meeting as their reason for the decision.
According to the Central Agency for Public Mobilization and Statistics (CAPMAS), Egypt’s headline consumer price index slowed down to 13.9% in July from 14.9% in June.
The figure represents a dramatic decline from the 38 percent peak recorded in September 2023. The Central Bank of Egypt has set the target for inflation to be going down in the next twelve months.
In fact, the bank decided to reduce the rates by 225 basis points in April and by 100 basis points in May, a reversal from the 600 basis points increase in March 2024.
Economist Nasser Saidi says that the economic turnaround is due largely to the financial aid that the Gulf countries have extended to Egypt in the forms of joint ventures and strategic partnerships.
