Inflation remains at levels far from CBE’s target, affirming stabilizing interest rates decision during next Thursday's meeting

Egypt's economic community is awaiting the next meeting of the monetary policy committee of the Central Bank of Egypt, scheduled for next Thursday. This meeting comes in the light of domestic and international economic developments that require an assessment of current monetary policy, with a view to balancing price stability on the one hand and supporting economic growth on the other.

The meeting comes amid a wide range of global and local challenges, most notably wars, economic problems and global inflation, which continue at high levels in many countries.

Nevertheless, central banks around the world have begun a monetary facilitation cycle to end the downturn that has continued since the beginning of the current global crisis in January 2023, following the multiple challenges to the global economy as the COVID-19 pandemic began to spread, followed by the Russian-Ukrainian war, and then the supply chains crisis.

At the global level, in recent meetings, we have witnessed the trend of central banks in advanced economies towards facilitating monetary policies through the reduction of interest rates. The U.S. Federal Reserve cut its interest rate by 50 basis points to 5%. This reduction is the first in more than four years and reflects the federal's shift in focus from anti-inflation, which has fallen to 2.5% and is close to the target rate, to support economic growth and try to get the US economy out of the recession it has already entered.

The ECB also cut its interest rate by 25 basis points to 3.50% after inflation in the Eurozone fell to 1.8% last September following a similar cut in June 2024.

In addition, development financing institutions have begun to reduce the cost of financing for countries, such as the International Monetary Fund (IMF), which has taken a step to reduce the cost of financing by about 36% for borrowing Member States, and the global monetary management cycle will thus contribute to a relatively strong demand and exit from the recession of the global economy in recent months.

At the local level, Egypt's general inflation rate was 26.4%, while the core inflation rate was about 25%, while the target rate announced by the Central Bank of Egypt was 7%. (± 2%) on average during the fourth quarter of 2024, hence inflation in Egypt remains at levels far from the central bank target, which reinforces the stabilization decision at next Thursday's monetary policy meeting

At the level of money supply, which is the main instrument the Central Bank of Egypt is trying to influence through monetary policy instruments to control inflation rates. It grew by 0.65% in August to 2.707 trillion pounds. This compared to a decline of 0.45% in July, which reflects an increasing growth and would threaten the Central Bank's inflation targets.

In the light of those variables, the Central Bank of Egypt has two options either to stabilize interest rates and continue its inflation blockade, which is more economically close, or to begin a wave of rate cuts in the coming period, turning the inflation target to other monetary instruments such as open market operations.