The Monetary Policy Committee (MPC) decided to keep the Central Bank of Egypt's (CBE) overnight deposit rate, overnight lending rate, and the rate of the main operation unchanged at 9.25 percent, 10.25 percent, and 9.75 percent, respectively. The discount rate was also kept unchanged at 9.75 percent. The CBE said the annual headline urban inflation increased to 5.9 percent in April 2020, up from 5.1 percent in March 2020, due to multiple unfavourable base effects stemming from muted price increases in April 2019 and price hikes in April 2020, broadly attributed to the pandemic and The seasonal factor of Ramadan. The central bank added that the annual headline inflation in April 2020 was driven by higher annual food contribution, mainly staple items, which offset lower annual contribution of non-food items. Accordingly, annual core inflation increased to 2.5 percent in April 2020, up from 1.9 percent in March 2020. The CBE added that the real GDP growth continued to stabilise around 5.6 percent in the fourth quarter of 2019, with the recovery in public domestic demand offsetting the moderation in private domestic demand, and the pickup in consumption offsetting the slowdown in investments. Meanwhile, leading indicators showed broad improvement on average in January and February 2020, before reflecting a slowdown in economic activity in March and April 2020. Nevertheless, the diversity of the economy provides some cushion given the resilience of some sectors, according to the statement. Globally, economic activity and employment have deteriorated significantly, which weighed on the outlook with risks mainly tilted to the downside. This was also reflected in the weakness of international oil prices, despite production cuts by major producers. “Against this background, and following the reduction of 300 basis points during the unscheduled MPC meeting on 16 March 2020, the MPC decided that keeping key policy rates unchanged remains consistent with achieving the inflation target of nine percent (±3 percentage points) in 2020 Q4 and price stability over the medium term,” according to the CBE statement. It stressed that the MPC closely monitors all economic developments and will not hesitate to utilise all available tools to support the recovery of economic activity within its price stability mandate. The next MPC meeting is scheduled for 25 June.
