Egypt’s central bank leaves key interest rates unchanged on limited inflation risk outlook

By bne IntelliNews May 30, 2014

Monetary Policy Committee (MPC) of Egypt’s central bank kept the overnight deposit rate, overnight lending rate as well as CBE’s main operation rate unchanged at 8.25%, 9.25% and 8.75%, respectively. The discount rate was also kept unchanged at 8.75%.

The MPC reasoned that annual headline Consumer Price Index (CPI) eased to 8.87% in April from 9.82% in March on the back of favorable base effect and muted food price inflation. In MPC’s view, the easing in the annual core CPI to 9.11% in April from 9.90% in March, on the back of favorable base effects from last year and the improbability of a sharp rebound in international food prices contributing factors, contain upside risks to the inflationary outlook.  

MPC’s decision was reinforced by sluggish economic growth in H1 (July-Dec) FY2013/2014 with real GDP growing by an annualized 1.2% compared to a growth rate of 2.1% during the first half of the year before on the back of modest growth rates in key sectors such as manufacturing and construction, whereas, other sectors such as tourism and petroleum actually contracted during the second quarter of FY2013/2014.

In addition, low investment levels and weak credit growth to the private sector in Egypt coupled with challenges facing economic recovery in the Euro area and softening growth in emerging markets, led the MPC to the view that a combination of all these factors could pose downside risks to domestic GDP going forward.

Therefore, the MPC concluded that it is appropriate to maintain the current key CBE rates given the downside risks to the domestic GDP combined with the negative output gap since 2011, with limited upside risks to the inflationary outlook going forward.  

Related Articles

Ankara and Tehran join wave of anger directed at Trump’s recognition of Jerusalem as Israel’s capital

US President Donald Trump's December 6 announcement that his administration has decided to unilaterally recognise Jerusalem as Israel's capital was described as “against international law” by ... more

Islamic State is finished declares Iran's President Rouhani

Iranian President Hassan Rouhani on November 21 declared the end of the so-called Islamic State militant and terrorist group following decisive battles in Iraq and Syria. Stating that he wished to ... more

Turkey the loser as Baghdad rewards Iran with control of Kurdish oil exports

Iran is taking control of oil exports from Iraqi Kurdistan's giant Kirkuk field with Baghdad authorising the move as a reward for the Iranians' help in quelling the Kurds' late September push for ... more