Cairo - Mubasher: The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) decided on Thursday to maintain interest levels at their current levels.
Overnight deposit rate, overnight lending rate, and the rate of the main operation will remain unchanged at 16.75%, 17.75%, and 17.25%, respectively.
The discount rate was also kept unchanged at 17.25%, according to the statement issued earlier on Thursday, in which the CBE explained the motivation for its decision.
With much focus being directed towards the rising consumer prices, since the decision of freeing exchange rates in November 2016, which was followed by a total of 700 basis points interest rates hike, the CBE explained that annual headline and core inflation continued to decline since August 2017, recording in May 2018 the lowest level since April 2016 at 11.4% and 11.1%, respectively.
Market analysts expect the recent economic reform by the Egyptian government to cause yet another hike in inflation rates by up to 5%, which drove the CBE to keep interest rates, despite its commitment to easing its policy in order to reach normal pre-currency flotation levels.
"Average annual headline inflation is expected to remain in line with the CBE’s target announced in May 2017, namely 13 percent (±3 percent) in Q4-18," the statment explained.
"Single digit inflation is expected to be reached after the temporary effect of supply shocks dissipates," it further added.
Unemployment also continued to decline, recording in the first quarter of 2018 the lowest rate since Q4-2010 at 10.6%.
Supported by foreign and domestic public investment demand, annual real gross domestic product (GDP)growth exhibited sustained increases since Q4-2016, recording in Q1-2018 a preliminary estimate of 5.4%.
Meanwhile, potential output is estimated to have benefited from structural reforms in the Egyptian economy, thereby easing inflationary pressures from the pickup in economic demand, the statement indicated.
The monetary policy statement also viewed the global scene, where financial conditions tightened, and oil prices rose, putting upward pressure on the magnitude of domestic fiscal consolidation.
The MPC closely monitors all economic developments and will not hesitate to adjust its stance to achieve its mandate of price stability over the medium term, the statement concluded.
