The Monetary Policy Committee (MPC) of Egypt’s central bank left its key interest rates unchanged at its regular meeting on April 28 following the 1.5% rise at the previous meeting in March. The overnight deposit rate, overnight lending rate and the central bank’s main operation rate remained unchanged at 10.75%, 11.75% and 11.25%, respectively, the central bank said in a statement. The MPC also kept the discount rate unchanged at 11.25%.

In the committee’s view, the key CBE rates are currently appropriate given the balance of risks surrounding the inflation and GDP outlooks. Headline Consumer Price Inflation (CPI) decelerated to 9% y/y in February and March from 10% y/y in January. The MPC reasoned that upside inflation risks were largely driven by the rise in food prices reflected in the annual core CPI increasing to 8.4% in March from 7.5% in February. Despite rising domestic inflation, the committee sees that on balance inflationary pressures could be mitigated by contained imported inflation.

Moreover, the MPC sees that downside risks to domestic GDP have shifted to external factors because of the contraction in tourism, the weaknesses in the extractions sector and negative growth in net exports related to challenges facing the global economy.

Consequently, preliminary figures indicated that the growth rate of the domestic economy has slowed to 3.5% during H1 FY2015/2016, down from 4.2% for FY2014/2015. Nevertheless, the construction and the real estate sector continued to boost the economy on the back of robust consumption by a growing population.