CAIRO (Reuters) -Egypt’s central bank lowered its overnight interest rates by a less-than-expected 100 basis points on Thursday, saying economic growth had accelerated in the first quarter while inflation had decelerated.
The Monetary Policy Committee (MPC) cut the overnight deposit rate to 24% and the lending rate to 25%, its second decrease this year after having left it unchanged for a year.
The median forecast of 16 analysts polled by Reuters was for the central bank to cut rates by 175 basis points.
The MPC statement said growth was projected to have accelerated to 5.0% in the first quarter from 4.3% in the last quarter of 2024 and would likely speed up further in the financial year that begins on July.
Annual headline inflation almost halved in February to 12.8%, due mainly to a base effect a year after Egypt received a $24 billion real estate investment from the United Arab Emirates and signed a $8 billion financial support programme with the International Monetary Fund.
Since then, inflation has gradually inched higher, reaching 13.9% in April.
“Inflation is expected to continue declining throughout the remainder of 2025 and 2026, albeit at a constrained pace given the expected drag from implemented and planned fiscal consolidation measures in 2025, in addition to the relative persistence of non-food inflation,” the statement said.
“The MPC judges that cutting policy rates by 100 basis points strikes a balance between vigilance against prevailing risks and the ample room available to advance the monetary easing cycle, whilst supporting the projected disinflation path over the forecast horizon,” it added.
The central bank in March 2024 hiked rates by 600 bps and allowed the currency to fall sharply against the dollar as part of its loan agreement with the IMF.
Money supply (M2) growth also decelerated in the first quarter, falling to an annual 25.8% at the end of March from 33.9% in February, according to central bank data.
(Reporting by Enas Alashray and Yomna Ehab; Writing by Tala Ramadan and Patrick Werr, Editing by William Maclean, Kirsten Donovan, Alexandra Hudson)
