Egypt Leaves Monetary Policy Unchanged


At its September 1st, 2014 meeting, Egypt's Central Bank decided to hold the overnight deposit rate steady at 9.25 percent, as policymakers consider the current policy stance to be appropriate to anchor inflation expectations. Last meeting, the central bank rose key rates by 100 bps.

The overnight lending rate and the rate of the CBE's main operation were left unchanged at 10.25 percent and 9.75 percent, respectively. The discount rate was also kept on hold at 9.75 percent.

Extracts from the press release by the Central Bank of Egypt:

While the direct first round effect of the price adjustments have led to a level shift up in the headline CPI in July 2014, higher than anticipated indirect and second round effects pose an upside risk to the inflation outlook. On the other hand, as the possibility of a sharp rebound in international food prices is unlikely in light of recent global developments, upside risks to the inflation outlook from imported inflation continue to be contained.

Looking ahead, while investments in domestic mega projects such as the Suez Canal are expected to contribute to economic growth, the 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.

At this juncture, the MPC judges that the key CBE rates are currently appropriate to anchor inflation expectations and limit a generalized price increase given the
lagged transmission of the previous rate hike across the economy and the balance of risks surrounding the inflation and GDP outlooks.

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.

Central Bank of Egypt | Joana Taborda | joana.taborda@tradingeconomics.com
9/1/2014 4:16:21 PM