Egypt's central bank keeps interest rates on hold during June

CAIRO – 23 June 2022: The Monetary Policy Committee (MPC) decided, Thursday to keep the Central  Bank of Egypt’s (CBE) overnight deposit rate, overnight lending rate, and the rate of the main operation 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.

 

The MPC referred to the slowdown of the Global economic activity as a result of the ongoing tensions between Russia and Ukraine, noting that trade sanctions imposed on Russia and corresponding supply-chain bottlenecks have elevated global commodity prices, such as international prices for oil and wheat. 

 

“Meanwhile, global financial conditions have tightened, as major central banks have continued to both tighten policy rates and reduce asset purchase programs with the aim of containing increased inflationary pressures in their respective countries. In addition, recently reintroduced COVID-19 lockdowns in China have raised concerns about exacerbating existing global supply-chain disruptions,” it added.

 

Locally, it stated that domestic economic activity continued to expand in 2022 Q1, albeit at a slower pace, registering a preliminary growth figure of 5.4 percent, compared to 8.3 percent in the fourth quarter (Q4) of 2021. 

 

According to MPC’s statement, the economic activity revealed a sectoral growth during the Q4 of 2021 which was supported by the robust positive contribution of tourism, non-petroleum manufacturing and trade. 

 

The witnessed softening in economic growth is attributable to several factors most notably the impact of the Russo-Ukrainian conflict, as well as the diminishing of the positive base effect observed during the previous three quarters, it added.

 

Economic activity during Q2 of 2022 showed a normal base with expectations to expand at a slower than projected pace. This is mainly a result of the unfavorable spillovers emanating from the Russian-Ukrainian conflict.

 

It noted that the decline of the unemployment rate during the first quarter of 2022 to reach 7.2 percent.

 

Meanwhile, annual headline urban inflation continued to increase, but at a slower pace, to record 13.5 percent in May 2022, from 13.1 percent in the previous month. In addition, annual core inflation – which excludes volatile food and regulated items – witnessed also a slower pace of increase for the second consecutive month. It continued its upward trend to record 13.3 percent in May 2022 from 11.9 percent in the previous month, according to the data.

 

“May 2022 inflation reading continued to be affected by the depreciation of the

Egyptian Pound, as well as by the repercussions of the Russo-Ukrainian conflict on commodities, it stated.

 

In May, the MPC decided to raise the overnight deposit rate, overnight lending rate, and the rate of the main operation by 200 basis points to 11.25 percent, 12.25 percent, and 11.75 percent, respectively. The discount rate was also raised by 200 basis points to 11.75 percent.