Central Bank of Egypt holds interest rates steady for third time in a row

Maintaining credit and discount rate at 19.75 percent
Central Bank of Egypt holds interest rates steady for third time in a row
Central Bank of Egypt

The Central Bank of Egypt (CBE) decided to keep interest rates unchanged for the third consecutive time. The decision was reached during the Monetary Policy Committee’s latest meeting.

The overnight lending rate remained at 20.25 percent, while the overnight deposit rate remained at 19.25 percent.

On a global scale, economic activity had slowed down, and the monetary tightening policies implemented by major central banks had contributed to a decrease in economic growth expectations. This was different from what was presented at the previous MPC meeting.

Read more: Egyptian economy makes modest gains amid high inflation

According to the bank’s statement, global commodity prices, especially energy prices, had generally decreased. This was a result of reduced speculation regarding potential oil supply shortages and weak global demand.

However, there was uncertainty regarding inflation projections, particularly concerning global energy prices, due to ongoing geopolitical tensions worldwide.

At the domestic level, CBE observed a slowdown in real GDP growth. In the second quarter of 2023, GDP recorded a growth rate of 2.9 percent, compared to 3.9 percent in the previous quarter.

Contraction in total domestic investment

The bank’s statement highlighted that the slowdown in economic growth primarily stemmed from a contraction in total domestic investment. While both consumption and net exports contributed positively to the growth rate, they were unable to offset the impact of reduced investment.

The statement also projected that the GDP growth rate would continue to decelerate during the fiscal year 2023/2024 compared to the previous fiscal year. However, it noted that the country’s domestic product is expected to gradually increase in the future.

This projection aligns with current data trends and takes into account the negative implications of geopolitical risks, particularly for the service sector.

Regarding the labor market, the Central Bank reported that the unemployment rate had largely stabilized at 7.1 percent in the third quarter of 2023.

Ongoing assessment

Additionally, CBE stated that the Committee would continue to evaluate the effects of the implemented restrictive monetary policy on the economy. This assessment would be based on data received in the upcoming period.

The Committee highlights that its projections regarding the anticipated trajectory of base rates of return rely on projected inflation rates rather than the prevailing inflation rates.

The Center emphasized that the Committee is committed to utilizing all accessible monetary policy tools to uphold restrictive monetary conditions and decrease the monthly inflation rates of the country.

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