The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) has maintained 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. The discount rate was also maintained at 8.75 percent. The MPC ascribed its decision to August's inflation readings. Egypt's annual headline urban inflation increased to 5.7 percent in August 2021, up from 5.4 percent in July 2021, after having accelerated from 4.9 percent in June 2021. Meanwhile, annual core inflation slightly declined to 4.5 percent in August 2021 from 4.6 percent in July 2021, after having increased from 3.8 percent in June 2021. CBE said that annual headline inflation rates were affected by unfavorable base effects during July 2021 and August 2021 as August 2020 and July 2020 reflected the impact of the COVID-19 outbreak and its resulting containment measures on inventory levels and consumption patterns. "Accordingly, the acceleration in August 2021 and July 2021 was mainly driven by higher annual contribution of food items. Annual food inflation increased for the fourth consecutive month to 6.6 percent in August 2021 from 4.8 percent in July 2021," CBE explained. It added that slightly offsetting this acceleration, is the decline in annual non-food inflation to 5.3 percent in August 2021 from 5.7 percent in July 2021, which is the lowest recorded level since April 2014. On the macroeconomic level, CBE noted that Egypt's real GDP growth recorded a preliminary figure of 7.7 percent in the second quarter of 2021, reflecting the sustained recovery of economic activity; as it continues to gather pace and rebound from last year's trough at negative 1.7 percent. It added that this development reflects a strong favorable base effect compared to the corresponding quarter's shrunken base during the peak of the pandemic last year. Moreover, this implies that growth in FY2020/2021 registered 3.3 percent, an upward revision from the 2.8 percent that was estimated previously and compared to 3.6 percent in the previous fiscal year. Moreover, leading indicators point towards a sustained strong pick-up across most sectors, according g to the CBE. Furthermore, the unemployment rate stabilized at 7.3 percent in Q2-2021 compared to 7.4 percent in Q1-2021. On the global level, CBE stated that economic activity continues to recover from the pandemic, although growth remains uneven across regions, as the pace of vaccinations varies across countries. Additionally, prospects of global economic recovery remain contingent on the efficacy of vaccines and the ability of countries to contain the spread of the virus, in light of the emergence of newer variants. "Global financial conditions continue to be accommodative. Compared to the last MPC, median forecasts for Brent oil prices are broadly stable, while international prices for food and some other commodities remain at multi-year highs", CBE elaborated. The MPC stressed that it closely monitors all economic developments and will not hesitate to utilize all available tools to support the recovery of economic activity, within its price stability mandate.
