The central bank sets the interest rate on deposits and loans.

The Monetary Policy Committee of the Central Bank of Egypt decided at its meeting today Thursday to maintain the rates of return on deposits and overnight loans and the central bank’s main operating rate at 8.25%, 9.25% and 8.75%, respectively. . In addition, maintaining the credit and discount rate at 8.75%.

The central bank said in a statement that the annual rate of headline inflation rose for the third consecutive month in urban areas to 5.7% in November 2020 from 4.5% in October 2020.The increase in the annual rate of headline inflation was mainly driven due to the increase in the annual contribution of food products since September 2020. The high inflation rate in November 2020 reflected a temporary supply shock in tomato prices. At the same time, the annual core inflation rate increased slightly to 4.0% in November 2020 compared to 3.9% in October 2020, indicating continued containment of inflationary pressures. The average headline inflation rate is expected to register one-time rates below 6.0% during the fourth quarter of 2020.The degree of potential deviation from the target rates depends mainly on the degree of lower tomato prices after the end of the shock, in addition to the change in other items.

The Central Bank of Egypt proactively took a number of measures, starting with the meeting of the emergency monetary policy committee on March 16, 2020, in which it decided to reduce the basic interest rates at the Central Bank of Egypt by 300 basis points as an exceptional measure, which contributes to supporting economic activity in all its sectors, especially in the public business sector. And the private and family sector. In addition to the initiatives launched by the Central Bank of Egypt to depend on local production and maintain low unemployment rates, which was followed by the reduction of the Central Bank’s basic interest rates by 50 basis points both in the meetings of 24 September and November 12, 2020, in light of the continued containment of inflationary pressures expected in the medium term. . As a result, the rate of return on deposits and overnight loans and the central bank’s main operating rate have dropped by 400 basis points since the beginning of the year, helping to boost economic activity.

The real GDP growth rate was initially recorded at 0.7% during the third quarter of 2020, compared to negative 1.7% during the previous quarter of the same year. The growth rate was initially recorded at 3.6% during the 2019/2020 fiscal year, compared to 5.6% during the prior fiscal year. The slowdown in the growth rate was due to the Corona pandemic and the containment measures that accompanied it. Most of the initial indicators on the demand side continued to gradually recover during October and November 2020, compared to the weakness recorded during the second quarter of the same year. The unemployment rate dropped to 7.3% during the third quarter of 2020, the lowest rate in history, compared to 9.6% during the second quarter of the same year.

At a global level, economic activity remains weak despite the easing of global financial conditions, as a consequence of the spread of the second wave of the Corona pandemic, the return of the closure and the tightening of precautionary measures, which will negatively affect the prospects for the global economy in the short term. Despite this, the development and initiation of vaccines for the Corona pandemic may mitigate the prevailing uncertainty in the medium term. Meanwhile, world oil prices have risen slightly recently.

In confirmation of the Central Bank’s continued support for the stability of the Egyptian economy, the target inflation rate was set on average during the fourth quarter of 2022 at 7% ± (2%) compared to 9% ± (3%) on average during the fourth quarter of 2020. This Monetary policy tools will continue to be used to control inflation expectations and contain inflationary pressures on the demand side and the secondary effects of supply shocks, which can lead to a deviation of target rate inflation. Inflation can deviate from target rates due to factors beyond the influence of monetary policy.

The overall real growth rate of the Egyptian economy is expected to gradually recover, in parallel with continued support for structural reforms in economic activity. On the other hand, annual inflation rates are expected to be affected by the negative impact of the base period during 2021, but will continue to register rates close to the middle of the target rate range of 7% during 2022.

The Monetary Policy Committee decided to keep the basic rates of return unchanged, which is consistent with achieving the target inflation rate of 7% ± (2%) on average during the fourth quarter of 2022 and price stability in the medium term. . Future inflation rates and not current rates, provided that the Monetary Policy Committee closely monitors all economic developments and risk balances, and does not hesitate to use all its tools to support the recovery of economic activity, provided they are contained inflationary pressures.