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The Central Bank of Egypt keeps interest rates unchanged

Fixing interest rates came in line with analyst expectations
Central Bank of Egypt
Egyptian note

In line with expectations, the Central Bank of Egypt (CBE) decided on Thursday to fix key interest rates, following a meeting of its Monetary Policy Committee.

The MPC said in a statement that the bank had left the interest rate on lending at 19.25 percent and on deposits at 18.25 percent.

“At the local level, the growth rate of real economic activity recorded 3.9 percent during the fourth quarter of 2022, compared to a growth rate of 4.4 percent during the third quarter of the same year,” the statement added. GDP growth is expected to slow in FY2022/2023 compared to the previous fiscal year, and then recover.”

The rate fixation was in line with many analysts’ expectations, with the CBE most likely to leave overnight interest rates unchanged after a slight decline in inflation in April and a 200 basis point rate hike in March.

The median forecast of 14 analysts polled by Reuters on Monday was that the Fed would leave interest rates unchanged despite inflation rising to 32.7 percent in March, approaching the highest all-time levels before slowing to 30.6 percent in April.

Read: First drop in Egypt’s inflation rate in 10 months

Three analysts expected a 100 basis point rate hike, and a fourth analyst expected a 200 basis point increase.

Analysts believe that keeping interest rates unchanged came according to expectations because the central bank needs to wait to see the impact of the recent rate hike on the markets.

The Monetary Policy Committee (MPC), which seeks to control rising inflation, raised interest rates by 200 basis points at its last meeting on March 30, in line with expectations, bringing the total increase to 1,000 basis points since the Russian-Ukrainian war in early 2022.

The MPC said inflation had eased, partly due to bottlenecks in domestic supply chains and lower commodity prices, and the foreign exchange rate.

“Globally, the outlook for global commodity prices has declined compared to the forecast presented to the MPC at its previous meeting,” it added.

Inflation slowed in Egypt’s cities for the first time since June 2022, setting an upward trajectory that lasted about 10 months amid a continuous rise in the prices of goods and services in the most populous Arab country, due to the rise in prices globally, the shortage of hard currency needed for imports, and the congestion of ports with stranded goods.

According to figures from the Central Agency for Public Mobilization and Statistics (CAPMAS), consumer prices in Egypt rose 30.6 percent year-on-year in April, up from 32.7 percent in March. On a monthly basis, inflation eased to 1.7 percent from 2.7 percent in March.

The Central Bank’s decision comes shortly after the start of sale procedures forThe United Bank as part of the government’s privatization program. The Central Bank of Egypt on Wednesday appointed Barclays’ investment bank to finalize its exit deal from its shareholding in The United Bank.

The United Bank, owned by the Central Bank of Egypt, is one of the Egyptian banks that Egypt is working to exit as part of a plan to sell more than 32 state-owned companies, by listing them on the stock exchange, selling stakes to strategic investors, or both.

Barclays will act as an international financial advisor alongside local financial advisor CI Capital to sell The United Bank, which has assets of EGP 60 billion (USD 1.9 billion), according to a statement from the Central Bank of Egypt.

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