The Central Bank of Egypt left key interest rates unchanged at its Monetary Policy Committee meeting on Thursday. The overnight deposit rate, overnight lending rate, and the rate of the main operation were left unchanged at 16.75 percent, 17.75 percent, and 17.25 percent respectively. The discount rate was also kept unchanged at 17.25 percent. "The MPC decided that keeping key policy rates unchanged remains consistent with achieving the targeted disinflation path," a statement from the MPC read. Annual headline and core inflation recorded 11.4 and 11.1 percent respectively in May, the lowest figures since April 2016. "Single digit inflation is expected to be reached after the temporary effect of supply shocks dissipates," the MPC says. The government hiked fuel prices earlier this month, as part of its plan to phase out fuel subsidies to curb the budget deficit. Currently, international factors put upward pressure on domestic fiscal consolidation, as oil prices increased and financial conditions tightened. "Fiscal consolidation measures are expected to lead to one-off increases in the price level, which translates into temporary higher inflation rates," the statement says. Nevertheless, the MPC expects annual headline inflation to remain consistent with the target of ±3 percent in the fourth quarter of 2018, according to the statement. The Ministry of Finance is targeting a primary surplus of around 0.2 percent of GDP in fiscal year 2017/18 and 2 percent the following years. Unemployment recorded 10.6 percent, the lowest figure since Q4 2010. GDP growth also increased in Q1 2018, with a preliminary estimate of 5.4 percent, continuing an upward trend since Q4 2016. "Meanwhile, potential output is estimated to have benefited from structural reforms in the Egyptian economy, thereby easing inflation pressures from the pickup in economic demand," the MPC says. The CBE had left interest rates unchanged last month, after cutting rates in February and in March by 100 basis points each time.
