CBE keeps key interest rates unchanged

The Monetary Policy Committee of the Central Bank of Egypt (CBE) announced at its meeting on Thursday, February 3, 2022 that they will keep the overnight deposit and lending rates and the central bank’s main operation rate at 8.25 percent, 9.25 percent, and 8.75 percent, respectively, as well as maintaining the credit and discount rate at 8.75 percent.

The annual headline urban inflation increased to 5.9 percent in December 2021 from 5.6 percent in November 2021, resuming its upward trend since May 2021.

The upward trend was driven by the negative effects of the base period caused by lower inflation rates in the second half of 2020, as well as the higher global prices of goods, in addition to many measures to control the state’s public finances.

The annual general inflation rate increased in December 2021, in particular, as a result of the decline in tomato prices at a rate greater than their seasonal pace during December 2020.

At the same time, the annual rate of core inflation rose in December 2021 for the fourth consecutive month, to record 6.0 percent from 5.8 percent in November 2021, partially affected by the negative impact of the base period, which reflected weak inflationary pressures during December 2020, in addition to the increase in the annual contribution of services and consumer goods.

At the local level, preliminary data indicated the continued recovery of the economy, at a growth rate of 9.8 percent in the third quarter of 2021, which is the highest quarterly growth rate of real GDP, since the beginning of the series of quarterly publications in the fiscal year 2001/2002.

Moreover, the growth on an annual basis was driven by the return of economic activity to its normal pace compared to the same period of 2021, which coincided with the gradual lifting of precautionary measures.

In the short term, the local economic activity is expected to record high growth rates supported by domestic demand, especially total domestic investments.

Preliminary indicators showed continued improvement in performance in most economic sectors.

For the labor market, the unemployment rate in general stabilized during the third quarter of 2021, to remain close to its level recorded before the outbreak of the coronavirus pandemic. The stability of the unemployment rate was due to the increase in the number of employed persons.

On the global level, the economy continued to recover from the coronavirus pandemic, although some signs of slowdown appeared due to the disruptions in global supply chains.

The CBE statement stated that the recovery of economic activity depends on the effectiveness of vaccines and the ability of some countries to contain the spread of the pandemic, especially in light of the emergence of new strains of the virus.

International oil prices have also recorded its highest level since the spread of the pandemic, and the prices of some minerals have risen.

According to the statement, the financial conditions are still supportive of global economic activity, although it is expected to see some regression in the near term.

Based on the above, the Monetary Policy Committee decided that the basic interest rates at the Central Bank were appropriate at the present time, and consistent with achieving the target inflation rate of 7 percent (± 2 percentage points) on average during the fourth quarter of 2022 amid price stability in the medium term.

The committee will closely follow up all economic developments and risk balances and will not hesitate to use all its tools to achieve the goal of price stability, the statement concluded.

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