The Central Bank of Egypt’s (CBE) Monetary Policy Committee (MPC) decided to lower the overnight deposit rate, the overnight lending rate, and the rate of the Central Bank of Egypt’s (CBE) main operation by 100 basis points to 17.75%, 18.75%, and 18.25% respectively. The discount rate was also reduced by 100 basis points to 18.25%. According to a statement issued by the CBE on Thursday.
Moreover, the interest rate cut is the result of the containment of inflationary pressures, as annual headline and core inflation rates declined in January 2018 to record 17.1% and 14.4% respectively, dropping from a peak of 33%, and 35.3% respectively in July 2017.
On the other hand, Egypt’s real GDP growth continued to improve for the fifth consecutive quarter to record 5.3% in December 2017, and 5.0% during 2017, marking the highest economic growth on record since 2010.
According to the statement, the MPC decision to reduce key policy rates by 100 basis points remains consistent with tight real monetary conditions, which remains a mandatory requirement to achieve the CBE’s inflation target of 13% (±3 percent) in Q4 2018.
This the first interest rate cut by the CBE since the pound floatation in November 2016, as the CBE has previously raised the interest rates by 200 basis points in May 2017, and by another 200 basis points in June 2017.