In brief
- The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) left the key policy rates unchanged in its February 2025 meeting. The overnight deposit rate, overnight lending rate, and the rate of the main operation were maintained at 27.25%, 28.25% and 27.75%, respectively.
- The monetary policymakers gave a more optimistic growth outlook despite the balance of risks skewed towards the downside, largely from the knock-on effect of a fragile external environment. Given our constructive view on the Egyptian pound and a more favourable inflation dynamics in the near-term, we expect the CBE to start its easing cycle in its April 2025 MPC meeting.
- The January 2025 inflation rate steadied at 24.0% with non-food deceleration offsetting a slight increase in the food inflation. For February 2025, we expect inflation to come in at 12.1% y/y and to grow at a sequential pace of 0.8%.
- With the fifth IMF review initially targeted for mid-March 2025, this cements our out-of-consensus view for Board consideration of a combined fourth and fifth reviews for a cumulative USD 2.4bn disbursement under the Extended Fund Facility (EFF) arrangement in March 2025. We see similarities with Kenya’s protracted seventh review that was ultimately combined with the scheduled eighth review.
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