The Central Bank of Egypt (CBE)’s Monetary Policy Committee (MPC) decided to cut interest rates by 100 basis points (1%), according to a statement issued by the CBE on Thursday.
The overnight deposit rate, the overnight lending rate, and the rate of the CBE’s main operation were each cut 100 basis points (bps) to 16.75%, 17.75%, and 17.25% respectively. The discount rate was also reduced by 100 basis points to 17.25%.
On 15 February 2018, the MPC moved to lower interest rates for the first time since floatation. At the time, the committee cut the overnight deposit rate, overnight lending rate, and the rate of the CBE’s main operation by 100 basis points to 17.75%, 18.75%, and 18.25%, respectively. The discount rate was also cut by 100 basis points to 18.25%.
In a statement issued in March, the CBE said that indicators issued by the Central Agency for Public Mobilisation and Statistics (CAPMAS) showed a decline in the annual inflation rate for seventh months in a row to 14.4% in February 2018, its lowest since October 2016.
Many economic experts had forecast that the MPC will likely cut policy rates by 100 bps at its meeting on Thursday as a result of the decline in core inflation, which matched the CBE’s target of 13% (±3 percent) in February.
Egypt’s inflation rate dropped from a 30-year high of 33.0% year-over-year in July last year to 17.1% y-o-y in January.
Since the currency floatation in November 2016, interest rates were raised by 4% (400 basis points), before February, to curb Egypt’s soaring inflation.
The 30-year high inflation of 33% in July 2017 came as a result of fuel subsidy cuts, currency devaluation, and implementation of a value added tax as part of the economic reform programme adopted by the government and blessed by the International Monetary Fund.