Central Bank of Egypt Leaves Rates On Hold

The Monetary Policy Committee of the Central Bank of Egypt decided on October 31st to leave the overnight deposit rate unchanged at 8.75 percent, after cutting it by 50 bps in the previous two meetings.

Excerpt from Central Bank of Egypt' press release:

Going  forward,  while  inflation  numbers  are  projected to  continue to  be affected  by seasonal  patterns  associated with  Eid festivities  and the  beginning  of the school year, 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.  

Meanwhile, real GDP growth registered 1.5 percent in 2012/2013 Q4, bringing the annual growth rate for the whole year of 2012/2013 to 2.1 percent, following a similarly feeble growth rate of 2.2 percent recorded in 2011/2012. Economic activity remained sluggish in 2012/2013  on  the  back  of  weak  growth  rates  in  most  of  the  key  sectors,  namely manufacturing, construction and tourism, in addition to the contraction in the petroleum sector.  In the meantime, investment levels remained low given the heightened uncertainty that faced market participants since early 2011 and the weak credit growth to the private sector. 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.  

Central Bank of Egypt Leaves Rates On Hold

Central Bank of Egypt | Joana Taborda | joana.taborda@tradingeconomics.com
10/31/2013 5:17:48 PM