Egypt's central bank keeps interest rates unchanged during April

CAIRO – 28 April 2021: The Monetary Policy Committee of the Central Bank of Egypt (CBE) decided Wednesday to keep the overnight deposit rate, overnight lending rate, and the rate of the main operation unchanged at 8.25 percent, 9.25 percent, and 8.75 percent, respectively.

The discount rate was also kept unchanged at 8.75 percent.

MPC decided that keeping policy rates unchanged remains consistent with achieving the inflation target of 7 percent (±2 percentage points) on average in 2022 Q4 and price stability over the medium term.

MPC clarified in a statement that the annual headline urban inflation stabilized at 4.5 percent in March and February 2021, after registering 4.3 percent in January 2021. It attributed the stabilization in the annual headline inflation rate to the combined effect of the higher annual contribution of food items, and the lower annual contribution of non-food items.

It added that annual food inflation increased in March 2021 after remaining stable in February 2021, reflecting higher annual contribution of volatile food items as well as core food items, but by a lesser extent, in line with their seasonal patterns.

“Meanwhile, annual non-food inflation declined, supported by broadly stable prices in March 2021 as well as favorable base effects. In the meantime, annual core inflation inched up slightly to 3.7 percent in March 2021 from 3.6 percent in February 2021,” MPC stated.

It also referred to the real GDP growth recorded a preliminary figure of 2.0 percent during 2020 Q4, up from 0.7 percent during the previous quarter. Moreover, some leading indicators point towards a resumption of recovery towards their pre-pandemic levels. Meanwhile, the unemployment rate stabilized at 7.2 percent during 2020 Q4 compared to 7.3 percent during the previous quarter.

According to MPC statement, global economic activity continues to display signs of recovery and resilience in the face of the COVID-19 pandemic, albeit with varying paces across countries and economic sectors. Prospects for global economic recovery remain contingent on the development of the pandemic, and the efficacy, availability and scale of distribution of vaccines. Global economic and financial conditions are expected to remain accommodative and supportive of economic activity over the medium term.

It added that international food and other commodity prices have continued to rise, as international oil prices remained elevated relative to their post-pandemic levels. The changes in international oil prices were driven by demand and supply side developments, which continue to weigh on their future price trajectories.

The MPC closely monitors all economic developments and will not hesitate to utilize all available tools to support the recovery of economic activity, within its price stability mandate, the statement added.