Business Hub – Cairo
The Monetary Policy Committee of the Central Bank of Egypt decided at its meeting on Thursday, June 23, 2022, to maintain the overnight deposit and lending rates and the central bank’s main operation rate at the level of 25.11%, 25.12% and 75.11%, respectively. The credit and discount rate were also kept at the level of 11.75%
Globally , Global economic activity has been slowing down as a result of the continuing Russian-Ukrainian crisis. Trade sanctions against Russia and the resulting bottlenecks in supply and supply chains have pushed up global commodity prices, As well as the prices of oil and wheat. And at the same time, Global financial conditions have been restricted, As the central banks abroad continued to tighten monetary policies by raising interest rates and reducing asset purchase programs to contain high inflation rates in their countries. In addition, The recently re-imposed lockdowns in China are raising concerns about the potential to exacerbate disruptions to global supply chains.
Preliminary data indicate that domestic economic activity continued to recover during the first quarter of 2022, albeit at a slower pace, as real GDP recorded a growth rate of 4.5%, compared to 3.8% during the fourth quarter of 2021. This slowdown is due to several factors. Most notably, the repercussions of the Russian-Ukrainian crisis, in addition to the fading of the positive impact of the base period, which lasted during the past nine months. . This is partly due to the repercussions
Economic activity is expected to witness lower growth rates than previously expected due to the negativity of the Russian-Ukrainian crisis. With regard to the labor market, the unemployment rate decreased in the first quarter of 2022, recording 2.7%. This decrease is due to the increase in employment rates, which in turn limited the increase in the labor force.
The annual rate of urban general inflation continued to rise, But at a slower pace, recording 5.13% in May 2022 from 1.13% in the previous month. in addition to, . .
The increase in the annual general inflation rate is due to the increase in the prices of non-food commodities. Inflation in food prices slowed for the first time since the beginning of the year, supported by the fading of the supply shock experienced in the previous months in some fresh vegetables. Inflation developments continued in May 2022, affected by the developments in the Egyptian pound exchange rate. As well as the repercussions of the Russian-Ukrainian crisis on commodity prices. The Monetary Policy Committee considers that global developments resulting from the Russian and Ukrainian crises are primary supply shocks that are outside the scope of monetary policy work. It is worth noting that monetary policy tools are used to control the targeted and announced inflation inflation expectations, Reducing inflationary pressures from the demand side and the secondary effects of supply shocks, which have been relatively higher than the targeted inflation rates.
In view of the initial supply shocks that lead to high inflation rates at present, inflation rates may deviate relatively from the central bank’s target inflation rate of 7 (±2% points) on average during the fourth quarter of 2022, provided that the decline returns gradually after that. The committee will continue to assess the impact of its decisions on inflation expectations and macroeconomic developments in the medium term, taking into account its decisions during the previous two meetings to raise basic interest rates. The Monetary Policy Committee stresses that achieving low and stable inflation rates in the medium term is a prerequisite for supporting the purchasing power of the Egyptian citizen and achieving high and sustainable growth rates. The Committee also emphasizes that the current interest rates depend primarily on expected inflation rates and not the prevailing rates. The committee will closely follow all economic developments and will not hesitate to adjust its policy to achieve the goal of price stability in the medium term.
