Egypt's central bank keeps interest rates unchanged for 4th meeting in row

CAIRO – 13 August 2020: The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) decided Thursday, August 13, to keep interest rates unchanged for the fourth meeting in row. 

The overnight deposit rate, overnight lending rate, and the rate of the main operation were kept at 9.25 percent, 10.25 percent, and 9.75 percent, respectively. 

The discount rate was also kept unchanged at 9.75 percent, according to MPC’s decision. 

MPC clarified in a statement that the annual headline urban inflation declined to 4.2 percent in July 2020 from 5.6 percent in June 2020, the lowest rate recorded since November 2019. 

“The decline was due to continued muted inflationary pressures and supported by favorable base effects,” it explained.

It further noted that monthly headline urban inflation recorded 0.4 percent in July 2020 compared to 1.8 percent in July 2019, which incorporated the impact of the implemented fiscal consolidation measures to reach cost recovery for fuel products in 2019.  July 2020 monthly headline urban inflation continued to reflect higher non-food prices and lower food prices for the third consecutive month. 

It also referred to the annual core inflation declined to 0.7 percent in July 2020 from 1.0 percent in June 2020, the lowest rate on record.

MPC expected annual headline inflation rate to remain below the inflation target’s mid-point of 9.0 percent on average during the fourth quarter of 2020.

The committee also stated that real GDP growth for FY19/20 recorded 3.8 percent compared to 5.6 percent in the first half of the fiscal year. This reflects the impact of the COVID-19 outbreak and the accompanying containment measures.

"The contribution of the public sector to growth increased in 2020 Q1, particularly in the petroleum manufacturing sector, which supported economic activity during this period. Meanwhile, a number of leading indicators started showing signs of recovery in June and July 2020, in tandem with the easing of the containment measures. The unemployment rate recorded 9.2 percent in April 2020, compared to 7.7 and 8.0 percent in 2020 Q1 and 2019 Q4, respectively," it added. 

On a global scale, it said that economic activity remained weak despite some recovery associated with some ease of the COVID-19 related lock-down measures, which partly supported the recent increase of international oil prices. Meanwhile, global financial conditions continued to improve, supported mainly by policy measures despite the ongoing uncertainty.

As an exceptional decision, the MPC decided, on Mar. 16, to cut the overnight deposit rate, the overnight lending rate, and the rate of the main operation in an emergency meeting by 3 percent or 300 basis points. 

This decision comes as a part of actions and measure took by CBE to curb the effect of the virus outbreak; extending the loan maturities for the major companies 6 months without any fines. 

According to the statement, 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.