The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) has decided to maintain the 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.
The discount rate was also kept unchanged at 8.75 percent.
The MPC attributed its decision to the increases of the annual headline urban inflation to 4.5 percent in February 2021, up from 4.3 percent in January 2021, after having decelerated from 5.4 percent in December 2020.
It said that the slight increase in February 2021 was driven by the unfavourable base effect and reflected the higher annual contribution of non-food items.
Meanwhile, annual food inflation remained stable after contributing to the decline in January 2021, in light of the continued reversal of the transitory shock in tomato prices, according to the committee.
Furthermore, annual core inflation remained stable at 3.6 percent for the second consecutive month in February 2021, according to the MPC.
On the other hand, Egypt’s real GDP growth at market prices increased in the fourth quarter of 2020 to post a preliminary figure of 2 percent, up from 0.7 percent during the third quarter of the year and a contraction of 1.7 percent during the second quarter, according to the committee.
It also added that detailed growth figures in the third quarter of 2020 illustrate that consumption continued to support economic activity, offsetting the combined unfavourable contributions of gross domestic investments and net exports.
Moreover, most leading indicators are gradually recovering to their pre-pandemic levels, according to the committee.
Meanwhile, the unemployment rate broadly stabilised at 7.2 percent during the fourth quarter of 2020, compared to 7.3 percent during the third quarter, after improving markedly from the 9.6 percent recorded during the second quarter of the same year,
On the global level, MPC said that the economic activity continues to show varying paces of recovery across countries and economic sectors, as the impact of the COVID-19 pandemic continues to weigh on the outlook.
It added that prospects for global economic recovery remain contingent on the scale of distribution, as well as the efficacy of vaccines.
Accordingly, the committee expects economic and financial conditions to remain accommodative and supportive of economic activity over the medium term, although global yield curves have steepened recently.
Meanwhile, international prices for oil, food and other commodities have surged to post-pandemic highs, with the level of uncertainty increasing regarding their future price trajectories, according to the committee.
It noted that the surge in international oil prices was largely driven by supply side developments, while the increase in the prices of other commodities stemmed from both supply and demand side factors.
Against this background, the MPC decided that keeping policy rates unchanged remains consistent with achieving the inflation target of 7 percent (±2 percentage points) on average in the fourth quarter of 2020 and price stability over the medium term.
The MPC affirmed that it closely monitors all economic developments and will not hesitate to utilise all available tools to support the recovery of economic activity, within its price stability mandate.