The Monetary Policy Committee (MPC) decided on Thursday 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. According to a CBE statement, annual headline urban inflation declined to 4.7 percent in May 2020, down from 5.9 percent in April 2020, supported by muted inflationary pressures as well as favourable base effects where monthly headline inflation recorded zero in May 2020, down from 1.1 percent in May 2019. The decline of annual headline inflation was mainly driven by lower annual food contribution, supported by favourable base effects stemming mainly from Ramadan and Eid-Al-Fitr being in May in 2019 compared to April and May in 2020, as well as lower annual non-food contribution by a lesser extent as the monthly increases in non-food items were weaker compared to the previous year, read the CBE statement. Meanwhile, annual core inflation declined to 1.5 percent in May 2020, down from 2.5 percent in April 2020, the lowest rate on record. Real GDP growth recorded a preliminary figure of five percent in the first quarter of 2020 as expected, down from 5.6 percent in the fourth quarter of 2019, as economic activity in March 2020 was partially affected by the impact of COVID-19 and the resulting containment measures, the CBE said. Unemployment recorded 9.2 percent in April 2020, compared to 7.7 and eight percent in the first quarter of 2020 and the fourth quarter of 2019, respectively, according to the statement. The CBE stated the recently announced gradual easing of lockdown measures is expected to support the recovery of economic activity. Globally, economic activity and employment have deteriorated significantly, which reflected in the weakness of international oil prices despite production cuts by major producers. Meanwhile, global financial conditions have improved despite the present uncertainty, the CBE said. “In light of such signs, and given the pre-emptive measures adopted by the CBE, including cutting interest rates by three percent during the unscheduled MPC meeting on 16 March, the MPC decided that keeping key policy rates unchanged remains consistent with achieving the inflation target of nine percent (±3 percentage points) in the fourth quarter of 2020 and price stability over the medium term. "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 central bank said.
