Cairo – Mubasher: The Central Bank of Egypt's (CBE) Monetary Policy Committee (MPC) on Thursday decided to keep interest rates unchanged.
The MPC maintained overnight deposit at 18.75%, overnight lending at 19.75%, and the rate of the CBE's main operation at 19.25%, the CBE said in a statement released late Thursday.
Since the MPC's last meeting on 17 August 2017, Egypt's annual headline inflation fell to 31.9% from 33.0% in July, while monthly inflation declined to 1.1% from 3.2%, the CBE said.
"Inflation in August was mainly driven by an upward adjustment of regulated prices due to higher electricity tariffs, as well as by the increase in prices of fresh vegetables," the bank said.
It added that on the other hand, core food prices saw the "lowest increase" since August last year, while the prices of services "were only affected by the indirect first-round effect of the hydrocarbon-subsidy reforms on inland transportation."
The prices of retail items were mostly stable, allowing annual core inflation to decline to 34.9% in August from 35.3% in July, whereas monthly core inflation retreated to 0.3% from 2.8%, the CBE said, highlighting that this drop resulted in "the lowest monthly inflation rate since July 2016."
Egypt's economic activity continued to improve with real gross domestic product (GDP) rising by a revised 5.0% in the fourth quarter of 2016/17.
"As a result, real GDP growth averaged 4.6% during the second half of 2016/17, growing at the fastest pace since 2009/10. This coincided with the narrowing of the unemployment rate to 12.0% on average during the second half of 2016/17, registering the lowest rate since 2011/12," according to the CBE.
Egypt's inflation outlook continues to be in line with the CBE's target, the bank noted, highlighting that "against this background and given the continuation of tightening real monetary conditions, the MPC decided that current policy rates remain appropriate at this juncture."
The MPC will continue to closely monitor all economic developments as well as the balance of risks and "will not hesitate to adjust its stance to offset anticipated deviations from the inflation target of 13% (+/- 3%) in Q4-18 and single digits thereafter", the CBE concluded.
