Why did the Central Bank of Egypt keep interest rates unchanged?

yousef3 February 2022Last Update : 2 years ago
Why did the Central Bank of Egypt keep interest rates unchanged?

For the tenth time in a row, the Central Bank of Egypt fixed the interest on the overnight deposit and lending rate and the central bank‘s main operation rate at 8.25%, 9.25% and 8.75%, respectively.

The central bank also kept the credit and discount rate at the level of 8.75%.

The Central Bank clarified in its monetary policy statement issued today that the upward trend of inflation is driven by the negative effects of the base period resulting from the decline in inflation rates in the second half of 2020.

As well as the rise in international prices of goods, in addition to many measures to control the state’s public finances. The annual general inflation rate increased in December 2021 in particular as a result of the decline in tomato prices at a rate greater than their seasonal pace during the month of December 2020.

The annual core inflation rate rose in December 2021 for the fourth consecutive month, to record 6.0% in December 2021 from 5.8% in November 2021, partially affected by the negative impact of the base period, which reflected weak inflationary pressures during December 2020, in addition to the increase in the annual contribution of services and consumer goods.

At the local level, preliminary data indicates the continued recovery of economic activity, recording a growth rate of 9.8% during the third quarter of 2021, which is the highest quarterly growth rate of real GDP since the beginning of the quarterly series publication in the fiscal year 2001/2002.

He pointed out that the growth on an annual basis was driven by the return of economic activity to its normal pace compared to the same period of the previous year, which coincided with the gradual lifting of precautionary measures.

In the short term, it is expected that the domestic economic activity will record high growth rates supported by domestic demand, especially total domestic investments. In addition, preliminary indicators show continued improvement in performance in most economic sectors.

With regard to the labor market, the unemployment rate in general stabilized during the third quarter of 2021, to remain close to its level recorded before the outbreak of the Corona virus pandemic. The stability of the unemployment rate is due to the increase in the number of employed, which greatly limited the rise in the labor force.

On the global level, economic activity continued to recover from the Corona pandemic, although some signs of slowdown appeared due to the disruptions in global supply and supply chains. In addition, the recovery of economic activity depends on the effectiveness of vaccines and the ability of some countries to contain the spread of the pandemic, especially in light of the emergence of new strains of the Corona virus.

International oil prices have also recorded their highest level since the spread of the pandemic, and the prices of some minerals have risen. The financial conditions are still supportive of global economic activity, but it is expected that they will witness some regression in the near term.

In light of the foregoing, the Monetary Policy Committee decided that the basic interest rates at the Central Bank are appropriate at the present time, and are consistent with achieving the target inflation rate of 7% (± 2 percentage points) on average during the fourth quarter of 2022 and price stability in the medium term. .

Tarek Amer, Governor of the Central Bank of Egypt, met with his Iraqi counterpart, Mustafa Ghaleb Mikhaif, and his accompanying delegation, yesterday, Wednesday, at the headquarters of the Central Bank of Egypt.

The Central Bank said in a statement today that the meeting dealt with enhancing joint cooperation and ways to develop work in the banking sector between the two sides, in light of the solid historical relations between the two brotherly countries.

The two governors signed a memorandum of cooperation and exchange of experiences in the banking sector and electronic payment, which contributes to strengthening investment fields and revitalizing banking and economic relations between the two countries.

Tariq Amer, Governor of the Central Bank of Egypt, welcomed his Iraqi counterpart in his second country, Egypt, expressing his happiness with this meeting and stressing the distinguished and strong relations that bring together the two brotherly countries.

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