Egypt's central bank to revisit key interest rates on Thursday; maintaining current levels is expected

Doaa A.Moneim , Thursday 18 Mar 2021

The current overnight deposit rate, the overnight lending rate, and the rate of the main operation are at 8.25 percent, 9.25 percent, and 8.75 percent, respectively


The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) is expected to review the key interest rates on Thursday for the second time in 2021.

In its February meeting, the MPC decided to keep the overnight deposit rate, the overnight lending rate, and the rate of the main operation unchanged at 8.25 percent, 9.25 percent, and 8.75 percent, respectively.

The discount rate was also kept unchanged at 8.75 percent.

In February, Egypt’s annual headline inflation in urban areas accelerated to reach 4.5 percent, up from 4.3 percent recorded in January, according to the Central Agency for Public Mobilisation and Statistics (CAPMAS).

CAPMAS also said that Egypt’s annual headline inflation rate stood at 4.9 percent in February, the same level recorded in February 2020, while the country’s headline monthly inflation saw a slight increase of 0.1 percent in February compared to January’s level.

The announced inflation levels remain within the inflation target set by the CBE by 7 seven percent (+/-2 percent) through 2022, which leaves room for the MPC to maintain the current interest rates.

The research unit of Belton Financial expected the MPC to keep the current interest rates unchanged in light of the recent announced inflation rates.

It said that the prices of food stuffs stabilising — following their decline over the past two months — the notable increase in the prices of commodities globally, and the rise of global oil prices, support keeping the current interest rates unchanged.

Meanwhile, HC Securities & Investment expects the MPC to maintain the current interest rates on the back of February’s inflation figures.

“The announced levels came in lower than our estimates of 4.9 percent Y-o-Y and 0.5 percent M-o-M, which we believe reflects suppressed consumer demand currently”, said Monette Doss, head of macro and financials at HC.

Over the rest of 2021, HC expects monthly inflation to increase to 0.8 percent M-o-M and 6.4 percent Y-o-Y, accounting for possible domestic price shocks following the recent commodity price rally and possible recovery in consumer confidence following the successful rollout of the COVID-19 vaccine.

It also expected 2021’s inflation rates to remain within the CBE’s target range of 7 percent (+/-2 pecent) for the fourth quarter of 2022.

Egypt’s economy was able to achieve a positive growth rate of 2 percent in the second quarter of the current FY2021/2022 and it is projected to accelerate to 2.8 percent during the third quarter of the current FY2020/2021, which ends in March, and to jump to 5.3 percent by the end of the fiscal year, which ends in June, according to the FY2021/22 performance indicators announced by the Ministry of Planning and Economic Development in March.

Also, Egypt’s economy growth rate average in the first half of FY2020/21 recorded 1.3 percent, compared to 5.6 percent at the same time during FY2019/20, driven by COVID-19’s repercussions.

Accordingly, Egypt managed to maintain its positive growth levels amid the COVID-19 crisis.

Moreover, the unemployment rate dropped to 7.2 percent during the second quarter of FY2021/2022, according to the planning ministry.

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