Egypt Leaves Rates on Hold


At its October 16th, 2014 meeting, the Central Bank of Egypt decided to hold its benchmark overnight deposit rate unchanged at 9.25 percent, saying that the current policy stance is appropriate to anchor inflation expectations and limit a generalized price increase. The overnight lending rate was also left on hold at 10.25 percent.

The rate of the CBE's main operation and the discount rate were kept constant at 9.75 percent, respectively.

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

While higher than anticipated indirect and second round effects resulting from the July 2014 regulated price adjustments pose an upside risk to the inflation outlook, upside risks from imported inflation continue to be contained on the back of lower international food price forecasts in light of global developments.

Meanwhile, real GDP picked up significantly in 2013/2014 Q4, growing by 3.70 percent compared to 2.50 percent, 1.44 percent and 1.04 percent recorded in Q3, Q2 and Q1, respectively. The expansion in economic activity during 2013/2014 Q4 came on the back of the acceleration in manufacturing and real estate activities, along with a moderate growth in the construction sector. This occurred despite the continued contraction witnessed in the tourism and petroleum sectors. In the meantime, investment continues to be below historical levels despite the relative improvement witnessed in the annual growth rate during 2013/2014 Q3 and Q4, following six quarters of contraction.

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.

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 balance of risks surrounding the inflation and GDP outlooks.

Egypt Leaves Rates on Hold


Central Bank of Egypt | Ricardo Martins | ricardo.martins@tradingeconomics.com
10/16/2014 5:48:34 PM