CAIRO – 22 September 2022: The Monetary Policy Committee (MPC) decided, Thursday, to keep the Central Bank of Egypt’s (CBE) interest rates unchanged for the third consecutive meeting.
The overnight deposit rate, overnight lending rate, and the rate of the main operation were kept on hold at 11.25 percent, 12.25 percent, and 11.75 percent, respectively. The discount rate was also kept unchanged at 11.75 percent.
Furthermore, The CBE decided to increase the required reserve ratio to 18 percent from 14 percent.
The central bank commented that these decisions work as a catalyst, complementing the tightening stance that the CBE is maintaining, by calibrating liquidity conditions.
The MPC saw that the current key CBE rates coupled with the increased required reserve ratio are consistent with achieving price stability over the medium term.
It referred to the rise of interest rates among major central banks in the world which would cause a tight in the global financial conditions, besides their tendency to reduce asset purchase programs with the aim of containing increased inflationary pressures in their respective countries, noting that the global economic activity is expected to lower due to the repercussions of the Ukrainian-Russian conflict.
“In contrast, global commodity prices, such as international prices of oil, have slightly declined, as a result of weakening demand due to global recession expectations,” it stated.
The central banks of some Gulf countries
tended to raise interest rates following the increase in the United States interest rates by 75 basis points on Sept. 21.
Reviewing the local economic activity, the CBE stated that it registered a preliminary growth of 3.2 percent during the second quarter of 2022. Thus, Egypt’s economic growth during the fiscal year 2021/2022 hit 6.6 percent, up from 3.3 percent in prior year.
According to the CBE, the latest available data for the first nine months of the fiscal year shows that GDP growth was mainly driven by the private sector, particularly non-petroleum manufacturing, tourism, and trade. Meanwhile, public sector activity was supported by natural gas extractions, Suez Canal and the general government.
Despite the indicators revealing continued growth during the third quarter of 2022, the growth pace would witness a slower rate than the targeted one, due to the uncertainty and negative spillovers from the global scene.
The CBE pointed to the stability of the unemployment rate at 7.2 percent during the second quarter of 2022 as a result of the increase of both employment and the labor force figures by similar magnitudes.
As for the inflation rate, the CBE attributed the increase of the annual urban rates which rose from 13.6 percent in July to 14.6 percent in August to supply side issues particularly international commodity prices. “Despite rising annual figures, the recorded monthly rates are lower than the recent highs witnessed during March and April 2022,” it commented.
It stated that the elevated annual headline inflation rate will continue to be temporarily tolerated above the CBE’s pre-announced target of 7 percent (±2 percentage points) on average in the fourth quarter of 2022.