Egypt’s central bank keeps interest rates on hold in 1st meeting during 2021

The Monetary Policy Committee of the Central Bank of Egypt (CBE) decided Thursday to keep 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.

MPC clarified in a statement that the annual headline urban inflation dipped to 5.4 percent in December 2020 from 5.7 percent in November 2020, attributing this decline to lower prices of fresh vegetables, reflecting their seasonal pattern as well as the partial reversal of the transitory shock in tomato prices.

“In the meantime, annual core inflation decelerated to 3.8 percent in December 2020 from 4.0 percent in November 2020,” it added.

Accordingly, annual headline urban inflation registered an average of 5.2 percent during 2020 Q4, coming below the lower target band of 6 percent previously announced in 2018. The deviation from the target was a result of the impact of the COVID-19 pandemic outbreak and its resulting government containment measures on economic activity, according to the statement.

The MPC decided that keeping policy rates unchanged remains consistent with achieving the inflation target of 7 percent (±2 percentage points) on average in 2022 Q4 and price stability over the medium term.

Moreover, the statement noted that the government’s successful implementation of several measures to avoid supply shortages in the market contributed to lower inflation rates. Nonetheless, given the balance of risks, the CBE undertook several preemptive measures to support economic activity while remaining consistent with achieving its price stability objective over the medium term.