File Photo: Central Bank of Egypt s headquarter is seen in downtown Cairo, Egypt September 18, 2018. REUTERS
The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) decided on Thursday to maintain the current overnight deposit rate, overnight lending rate, and the rate of the main operation unchanged at 8.25 percent, 9.25 percent, and 8.75 percent, respectively.
It also maintained the discount rate at 8.75 percent.
The MPC stated that the decision is consistent with the inflation target set by the CBE at 7 percent (±2 percent) through the fourth quarter of 2022 to ensure price stability over the medium term.
The CBE said that their decision was built on the recent readings of domestic annual headline urban inflation, which increased in September to 6.6 percent, up from 5.7 percent in August 2021.
“Annual headline inflation rates were affected by unfavorable base effects during September 2021 as expected as well as strong monthly dynamics mainly related to higher tomato prices. Accordingly, the acceleration in September 2021 was mainly driven by the higher annual contribution of food items. Annual food inflation increased for the fifth consecutive month to 10.6 percent in September 2021 from 6.6 percent in August 2021,” the CBE explained.
The CBE added that this acceleration was partially offset by the decline in annual nonfood inflation to 4.9 percent in September, the lowest since December 2012.
Meanwhile, Egypt’s GDP growth rate increased to 7.7 percent in the second quarter (2Q) of 2021 compared to 2.9 percent during the 1Q of 2021, driven by the strong positive contributions of gross domestic investments as well as consumption, according to the CBE.
The CBE pointed out that tourism, non-petroleum manufacturing and natural gas extraction contributed most towards economic growth, adding that private sector activity remains the main contributor towards Egypt’s overall GDP growth.
Moreover, the unemployment rate declined to 7.3 percent in 2Q of 2021, down from 7.4 percent during 1Q.
The CBE expects Egypt’s economic activity to increase over the near term to produce robust growth figures driven by domestic demand, which will also be impacted by favourable base effects.
On the global level, the CBE noted that economic activity continues to recover from the pandemic, but has shown signs of a likely slowdown on the back of the global supply chain disruptions.
Furthermore, prospects of global economic recovery remain contingent on the efficacy of vaccines and the ability of countries to contain the spread of COVID-19, according to the CBE.
In addition, the CBE predicted global financial conditions to remain accommodative and supportive of economic activity over the medium-term.
The MPC noted that it closely monitors all economic developments, and asserted its commitment to utilise all available tools to support the country’s economic recovery within its price stability mandate.