Excerpt from Central Bank of Egypt' press release:
Headline CPI declined by 1.02 percent (m/m) in December after recording an increase of 0.95 (m/m) in November, bringing the annual rate to 11.66 percent in December down from 12.97 percent in the previous month. Monthly developments in headline inflation during 2013 Q4 were largely driven by higher prices of several food items and a number of non-food items. Additional upward pressure came on the back of a sharp rise in the prices of butane gas cylinders in light of bottlenecks in the distribution channels which relatively eased in December. As upside risks to the inflation outlook continue to moderate as the possibility of a rebound in international food prices is unlikely in light of recent global developments, annual inflation is projected to ease from their current levels in the coming months.
Meanwhile, real GDP continued to lose some of its already weak momentum in 2013/2014 Q1, growing by 1.04 percent compared to the feeble growth rate of 2.1 percent recorded in 2012/2013. Looking ahead, downside risks that surround the global recovery on the back of challenges facing the Euro Area and the softening growth in emerging markets could pose downside risks to domestic GDP going forward.
The pronounced downside risks to domestic GDP combined with the persistently negative output gap since 2011 will limit upside risks to the inflation outlook going forward. Given the mixed balance of risks surrounding the inflation and the GDP outlooks at this juncture, MPC judges that the current key CBE rates are appropriate.
The MPC will continue to closely monitor all economic developments and will not hesitate to adjust the key CBE rates to ensure price stability over the medium-term.