As widely anticipated, the Central Bank of Egypt (CBE) decided to keep key interest rates unchanged. This is despite the country’s significant inflation rate of 37.4 percent, as reported in September. This move reflects the CBE’s stance on stabilizing rates in the face of prevailing inflationary pressures.
The Bank underscored its forward-looking approach towards inflation, prioritizing long-term considerations over immediate concerns. It reaffirmed its commitment to address inflationary pressures in the future. Furthermore, the Bank recognized the sustained stability of economic growth throughout the third quarter spanning from July to September.
Read more: Central Bank of Egypt surprises markets with 100 basis point interest rate hike
CBE’s choice to uphold stability in interest rates is in line with recent economic and global trends. Of particular note is the sustained upward trajectory of global commodity prices, particularly energy prices, surpassing previous projections.
The Bank’s monetary policy committee reached unanimous decision to keep the interest rate, deposit rate, lending rate for one night, and CBE’s main operation rate unchanged at 19.25 percent, 20.25 percent, and 19.75 percent, respectively. The credit and discount price also remained stable at 19.75 percent.
In August, the Central Bank raised interest rates by 1 percentage point. However, during the September meeting, the rates were left unchanged. This brings the total rate increase to 11 percent since March 2022, when the value of the pound was allowed to fluctuate.
GDP projections
CBE’s statement highlighted its dedication to assessing the repercussions of the implemented rigorous monetary policy on the economy. It underscored the significance of evaluating forthcoming data to gauge the policy’s impact in the near future.s statement emphasized its dedication to assessing the repercussions of the implemented rigorous monetary policy on the economy. It reinforces the significance of assessing forthcoming data to gauge the policy’s impact in the near future.
The Committee stressed that the direction of base rates of return relied on projected inflation rates rather than current inflation rates.
Additionally, Tthe statement expressed the Committee’s commitment to monitoring economic developments and the risks associated with inflation expectations. The Committee affirmed its readiness to utilize all available monetary policy instruments in order to sustain tight monetary conditions, with the objective of achieving average inflation targets of 7 percent in the fourth quarter of 2024 and 5 percent in the fourth quarter of 2026.
First-quarter 2023 Real GDP growth remained steady at 3.9 percent, unchanged from the previous quarter in 2022. Detailed data for the same period revealed that economic activity was propelled by the favorable impact of both consumption and net exports.
The projected GDP growth rate for fiscal year 2022/2023 is expected to decelerate compared to the previous fiscal year, which recorded a growth rate of 6.7 percent.
The Committee’s statement indicated that general urban inflation continued to rise as expected, reaching 38.0 percent in September 2023. This upward trend was primarily driven by increased food inflation, accompanied by a relatively slower pace of non-food inflation.
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