Business Hub – Cairo
The Monetary Policy Committee of the Central Bank of Egypt decided, in its meeting yesterday, to keep the overnight deposit and lending rates and the central bank’s main operation rate at the same level. 11.25% ، 12.25% , 11.75 % Respectively. The credit and discount rate were also kept at 11.75%.
The Central Bank of Egypt also decided to increase the percentage of cash reserves that banks are obligated to keep with the Central Bank of Egypt to become 18% instead of 14%. This decision will help in restricting the monetary policy pursued by the Central Bank.
A central statement headed by Governor Hassan Abdullah revealed a decline in economic activity expectations as a result of the effects of the Russian-Ukrainian crisis. And at the same time, Central banks abroad continued to restrict monetary policies by raising interest rates and reducing asset purchase programs to contain rising inflation in their countries. International prices of some basic commodities have fallen relatively, like petroleum, This is as a result of the decline in demand due to expectations of a global recession.
at the local level,
Preliminary data indicate that real GDP recorded a growth rate of 3.2% during the second quarter of 2022, Recording a growth rate of 6.6% during the fiscal year 2021/2022, compared to 3.3% during the previous fiscal year. The growth in real GDP, according to the detailed data for the first nine months of the fiscal year 2021/2022, was mainly driven by the contribution of the private sector. In particular, the contribution of each of the non-petroleum manufacturing industries sector, Tourism and trade. And at the same time, The growth in the public sector was driven by the contribution of the natural gas extraction sector, The Suez Canal and the General Government. Furthermore, Some initial indicators are still recording positive growth rates during the third quarter of 2022. Economic activity is expected to grow at a slower pace than previously expected. This is partly due to the uncertainty and negative repercussions at the global level.
The unemployment rate stabilized at 7.2% during the second quarter of 2022. This is due to the increase in the number of workers and the labor force to the same extent. To challenge each other’s contribution.
The annual general urban inflation rate rose to 14.6% in August 2022 from a rate of 13.6% in July 2022. As well as the annual rate of core inflation – which is calculated by excluding the group of fresh vegetables and fruits as well as goods and services priced at administratively – 16.7% in August 2022 from 15.6% in July 2022. The rise in the annual rate of inflation since the beginning of 2022 is mainly due to supply-side shocks. In particular, the rise in world prices of goods. Despite the high annual rates of inflation, However, the monthly rates recorded lower percentages compared to the highest levels recorded during the months of March and April 2022.
In light of the foregoing, the Monetary Policy Committee considers that the current basic interest rates with an increase in the cash reserve ratio that banks are committed to maintain with the Central Bank of Egypt are consistent with achieving the goal of price stability in the medium term. The Committee will continue to assess the impact of its decisions on inflation expectations and macroeconomic developments in the medium term. Taking into account that the impact of its previous decisions to raise basic interest rates by 300 basis points during 2022 is still transmitted to the economy. As for the central bank’s target inflation rate of 7% (± 2 percentage points) on average during the fourth quarter of 2022, Temporarily higher inflation rates are expected. The Central Bank affirms its commitment to achieving low and stable inflation rates in the medium term, which is a prerequisite for achieving sustainable growth rates.
The Committee will closely follow all global and local economic developments and will not hesitate to use all its monetary tools to achieve the goal of price stability in the medium term. The Committee also stresses that the current interest rates depend mainly on the expected inflation rates and not the prevailing rates.