The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) decided on Wednesday to keep the current interest rates unchanged for the third time in a row in 2021. According to the decision, the overnight deposit rate, overnight lending rate, and the rate of the main operation were maintained at 8.25 percent, 9.25 percent, and 8.75 percent, respectively. The discount rate was also kept unchanged at 8.75 percent. The MPC said that its decision is consistent with achieving the inflation target of 7 percent (±2 percentage points) on average in the fourth quarter of 2022 and price stability over the medium term. The decision came in light of the stabilisation of Egypt's annual headline urban inflation at 4.5 percent in March and February 2021, after registering 4.3 percent in January 2021, according to the CBE. The stabilisation in the annual headline inflation rate came due to the combined effect of the higher annual contribution of food items and the lower annual contribution of non-food items, the CBE expounded. It added that annual food inflation increased in March 2021 after remaining stable in February 2021, reflecting higher annual contribution of volatile food items, as well as core food items, but by a lesser extent, in line with their seasonal patterns. Meanwhile, annual non-food inflation declined, supported by broadly stable prices in March 2021, as well as favorable base effects, according to the CBE. Moreover, annual core inflation inched up slightly to 3.7 percent in March 2021 from 3.6 percent in February 2021. On the other hand, Egypt's real GDP growth recorded a preliminary figure of 2.0 percent during the fourth quarter of 2020, up from 0.7 percent during the previous quarter. The CBE also said that some leading indicators point towards a resumption of recovery towards their pre-pandemic levels. It also added that the unemployment rate stabilised at 7.2 percent during the fourth quarter of 2020, compared to 7.3 percent during the previous quarter. On the global level, the CBE noted that economic activity continues to display signs of recovery and resilience in the face of the COVID-19 pandemic, albeit with varying paces across countries and economic sectors. Prospects for global economic recovery remain contingent on the development of the pandemic, and the efficacy, availability, and scale of distribution of vaccines, according to the CBE. The CBE expected global economic and financial conditions to remain accommodative and supportive of economic activity over the medium term. Meanwhile, international food and other commodity prices have continued to rise, as international oil prices remained elevated relative to their post-pandemic levels. The CBE said that the changes in international oil prices were driven by demand and supply side developments, which continue to weigh on their future price trajectories. The MPC confirmed that it 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 coming MPC meeting is scheduled for 17 June.
