The Monetary Policy Committee (MPC) of the Central Bank of Egypt decided on Thursday to keep the overnight deposit rate, overnight lending rate, and the rate of the main operation unchanged at 8.25 percent, 9.25 percent, and 8.75 percent respectively for the fourth time in 2021. The discount rate was also kept unchanged at 8.75 percent. The MPC attributed its decision to the recent annual headline urban inflation readings, which increased to 4.8 percent in May 2021 – from 4.1 percent in April – after having decelerated from 4.5 percent in March 2021. It said that annual headline inflation rates were affected by favourable and then unfavourable base effects during April and May 2021, reflecting the early impact of the outbreak of COVID-19 and its related containment measures on inflation readings during 2020. The CBE expects inflation rates to continue to be affected by unfavourable base effects in the near term. On Egypt's real GDP, the CBE noted that it grew to 2.9 percent during the first quarter of 2021, up from 2 percent recorded in the fourth quarter of 2020. The fourth quarter of 2020 showed that growth continues to be supported by a robust positive consumption contribution, and in particular private consumption, according to the CBE. Moreover, the unfavourable contributions of gross domestic investments and net exports continue to subside, said the CBE. Meanwhile, sectoral GDP growth was supported by the positive contributions of trade, construction and communication, while tourism and non-petroleum manufacturing continue to weigh down on growth despite their recent pick-up, according to the CBE. "Furthermore, leading indicators point towards a sustained momentum of recovery across the board," CBE explained. As for unemployment, the CBE said that its rate stabilised at 7.4 percent during the first quarter of 2021, compared to 7.2 percent during the previous quarter. On the global level, the CBE noted that economic activity continues to recover from the COVID-19 pandemic, although growth remains uneven across regions, as some countries are yet to contain the spread of the virus. Prospects for global economic recovery remain contingent on the scale of distribution, as well as the efficacy of vaccines, according to the CBE. It added that global financial conditions are also anticipated to remain accommodative and supportive of economic activity over the medium term. It also noted that prices for oil, food and other commodities have risen, maintaining the prevailing level of uncertainty regarding their future price trajectories. "The rises in international oil and other commodity prices were driven by both demand and supply side factors," the CBE illustrated.
