The Monetary Policy Committee (MPC) has cut the Central Bank of Egypt’s overnight interest rate, overnight lending rate, and the rate of the main operation by 150 basis points to 14.25 percent, 15.25 percent, and 14.75 percent respectively, a statement by the CBE read on Thursday.
The discount rate was also cut by 150 basis points to 14.75 percent.
The CBE said that the recent decline in the local inflation figures is one of the reasons behind the decision, adding that "annual headline and core inflation continued to decline to record 5.9 percent in July 2019, the lowest rate in almost four years, notwithstanding the recently implemented fiscal consolidation measures that reached cost recovery for most fuel products."
"This decline was supported by the containment of inflationary pressures, as evident in the relatively tame monthly inflation figures, and by favorable base effects, as the recently implemented measures were weaker compared to the previous year," the statement said.
Real GDP growth continued to increase slightly to record a preliminary estimate of 5.7 percent in 2019 Q2 and 5.6 percent in fiscal year 2018/19, the highest in 11 years. Meanwhile, the unemployment rate continued to decline to record 7.5 percent in 2019 Q2, thereby narrowing by almost 6 percentage points from its peak in 2013 Q4.
Fears that a global recession is in the making also makes the move inevitable, as number of analysts explained to Ahram Online before the meeting.
"Globally, the expansion of economic activity continued to weaken, financial conditions eased, and trade tensions continued to weigh on the outlook. International oil prices recently declined, yet remain subject to volatility due to geopolitical risks and potential supply-side factors", the CBE statement added.