Central bank cuts interest rates for the first time since last March (full details)

In an unexpected decision, the Monetary Policy Committee of the Central Bank of Egypt, at the end of its meeting on Thursday evening, lowered both the overnight deposit and loan rate and the rate of the central bank’s main operation by 50 basis points, or 0.5% from 9.25% to 8.75% and from 10.25% to 9.75%. And from 9.75% to 9.25%, respectively.

The overall urban annual inflation rate fell to 3.4% in August 2020 compared to 4.2% in July 2020, which is the second lowest rate on record, after October 2019, in nearly fourteen years.

The decline in inflation continued, supported by the containment of inflationary pressures, which was due to the decrease in the annual contribution of food products to a greater extent than to the increase in the annual contribution of non-food products.

This was driven by falling prices for fresh vegetables, as opposed to their seasonal pattern for the second month in a row. As a result, the monthly urban inflation rate continued to reflect falling food commodity prices and rising non-food commodity prices for the fourth consecutive month. Consequently, the annual core inflation rate increased to 0.8% in August 2020 compared to 0.7% in July 2020.

Preliminary data showed that the real growth rate of gross domestic product reached 3.5% during the 2019/2020 fiscal year, compared to 5.6% during the first half of the same year.

The unemployment rate registered 9.6% during the second quarter of 2020 compared to 7.7% during the first quarter of the same year. These developments came about as a result of the negative impact of the spread of the Corona pandemic on the real economy. The data indicates that some initial indicators have stabilized during July and August 2020 after the notable improvement in June 2020.

In light of the above, and as a result of containing inflationary pressures and all internal and global developments, the Monetary Policy Committee decided to reduce the central bank’s basic interest rates by 50 basis points.

This decision is consistent with the achievement of price stability in the medium term. Lowering the base rates of return at the committee meeting also provides adequate support for economic activity at the present time.

The committee will continue to follow all economic developments and will not hesitate to adjust its policy to maintain monetary stability.

The ALICO Assets and Liabilities Committees of banks operating in the local market are expected to hold intensive meetings in a few days to discuss the destination of interest rates. The minds of the central bank’s decision to cut

It is noteworthy that the National Bank of Egypt and Egypt decided this week to stop issuing investment certificates with a return of 15%, for a year, starting last Monday, after the meeting of the Assets and Liabilities Management Committee of the two banks, while the National Investment Bank decided to lower the interest rate on its savings vessels.

Globally, economic activity remains weak despite some recovery. World oil prices have generally stabilized and global financial conditions have continued to improve despite prevailing uncertainty.