CBE’s Monetary Policy Committee decides to keep key interest rates

Cairo – November 2, 2023: The Central Bank of Egypt’s Monetary Policy Committee (MPC) announced that it will maintain key interest rates, making it the second consecutive meeting in which the committee decided to abstain from changes.

The MPC left the overnight deposit rate at 19.25 percent, the overnight lending rate at 20.25 percent, the main operation rate at 19.75 percent, and the discount rate at 19.75 percent.

According to its Thursday release, Egypt’s real GDP growth for the first quarter of 2023 remained steady at 3.9 percent, compared to the previous quarter. The MPC attributed this to improvements in consumption and net exports, with the latter powering real growth since Q1 2022, in line with exchange rate developments.

For FY2022/2023, the MPC projects a narrowed real GDP growth compared to the previous fiscal year (FY2021/2022) which witnessed growth of 6.7 percent.

“Leading indicators for Q3 2023 suggest a general stability in economic activity compared to Q2 2023. Meanwhile, the unemployment rate slightly declined to 7.0 percent in Q2 2023 compared to 7.1 percent in the previous quarter, mainly due to an increase in employment, absorbing new entrants into the labor market,” the statement wrote.

The MPC wrote that, driven by higher food inflation, annual urban inflation continued to rise to reach 28 percent in September 2023, depsite non-food inflation slowing.  

According to the committee’s statement, for the third consecutive month, rising food inflation was accelerated by elevated prices of volatile food items, as opposed to core food items in previous months.

The statement explained this was due to difficult weather conditions, leading to higher prices of seasonal agricultural products.

Annual core inflation declined for the third consecutive month, registering 39.7 percent in September 2023, down from 40.4 percent in August 2023.

Internationally, the MPC noted that projections for key international commodity prices, particularly energy, have been revised upwards since its last meeting, primarily due to rising geopolitical tensions in the region.

Despite this, it highlighted that inflationary pressure relaxed worldwide due to monetary policy tightening cycles in major economies and favorable base effects. This will lead to forecasts of headline inflation in certain global economies to be lower, but are “still expected to remain above their respective target levels”.