The Monetary Policy Committee of the Central Bank of Egypt decided, at its meeting on Thursday, to keep important interest rates unchanged, including overnight deposit rates, overnight lending rates, and the main operation rate at 12.25 percent, 13.25 percent, and 12.75 percent respectively, with the credit and discount rate kept at 12.75 percent.
Egypt’s annual urban consumer inflation rate rose to 7.2 percent in January 2020 compared to 7.1 percent in December 2019, with a monthly inflation rate of 0.7 percent in January 2020 compared to 0.6 percent in January 2019.
The increase in the monthly inflation rate was due to the increase in the prices of food commodities, in addition to the increase in the prices of non-food commodities to a lesser degree, according to the CBE.
Meanwhile, the annual rate of core inflation recorded 2.7 percent in January 2020 compared to 2.4 percent in December 2019. The annual rates of inflation were consistent with the expectations of the Central Bank of Egypt, according to its statement on Thursday.
Real GDP growth rate stood at 5.6 percent during the second half of 2019.
Monetary policy also continued to support private domestic demand, which became the main driver of growth, surpassing the contribution of net exports to GDP growth during the first nine months of 2019.
This development was driven by an increase in private investment, the statement said.
Although the global economic growth rate has stabilized and the risks associated with global trade policies have dimmed, the emergence of the novel coronavirus, which has killed over 2,000 in mainland China and spread to over two dozen countries around the world, might impact the outlook for the global economy, at least in the short term, the statement added.
Regarding the labor market, the unemployment rate increased to 8.0 percent during the fourth quarter of 2019 compared to 7.8 percent and 7.5 percent during the third and second quarters of the same year, respectively.
After reducing the basic return rate by 350 basis points during the second half of 2019, the Monetary Policy Committee decided that the current rates of return are appropriate at the present time and are consistent with achieving the target inflation rate of 9 percent during the fourth quarter of 2020
The Monetary Policy Committee will closely follow economic developments in Egypt and will not hesitate to resume policies of monetary easing, provided it continues to account for inflationary pressures, the statement concluded.
Monetary easing is a process by which a central bank lowers interest rates and deposit ratios so credit is more easily available. Monetary easing makes borrowing easier for businesses, which can stimulate investment and allow businesses to expand their operations.
The Monetary Policy Committee cut key interest rates three times in 2019, in August, September and in November, while pursuing a monetary easing cycle.
Edited translation from Al-Masry Al-Youm