Egypt’s central bank keeps key interest rates unchanged

Egypt’s central bank has kept on Thursday its key interest rates unchanged, balancing a steep growth slowdown stirred by the coronavirus crisis with an unexpected uptick in inflation.

The overnight lending rate is 10.25 percent while the overnight deposit rate 9.25 percent.

“Leading indicators showed broad improvement on average in January and February 2020, before reflecting a slowdown in economic activity in March and April 2020,” the central bank’s Monetary Policy Committee (MPC) said in a statement.

It said holding key policy rates steady was consistent with achieving its inflation target of 9 percent plus or minus three percentage points by the last quarter of 2020.

The MPC attributed the uptick in annual inflation to 5.9 percent in April from 5.1 percent in March to an unfavourable base effect and stronger seasonal demand due to the onset of Ramadan, which started on April 24.

Since the outbreak of the coronavirus crisis, Egypt has contended with the collapse of its tourism industry and a fall in gas exports, Suez Canal revenue, and remittances from workers abroad.

Egypt had been targeting 5.6 percent growth for the current financial year which ends in June but is now hoping to make a 4.2 percent. It had predicted 6 percent growth for financial year 2020/21 but is now seeing only 2 percent if the pandemic crisis continues through December.

The central bank’s MPC left rates on hold at its last meeting on April 2, two weeks after having cut them by three percentage points at a surprise meeting as a “pre-emptive” move to support the economy in the face of the virus outbreak.