The Central Bank of Egypt maintained its overnight interest rates on Thursday, as anticipated, citing a slowdown in GDP growth to 2.9% in the second quarter of 2023 and a deceleration in headline inflation during October and November. The Monetary Policy Committee (MPC) announced its decision, keeping the deposit rate at 19.25% and the lending rate at 20.25%, according to a statement released.
The MPC statement revealed that second-quarter growth declined to an annual rate of 2.9%, down from 3.9% in the first quarter. This suggests a growth projection of 3.8% for the entire fiscal year 2022/23, which concluded on June 30. Notably, the economy had witnessed a growth of 6.7% in fiscal year 2021/22. The MPC anticipated a further slowdown in real GDP growth during fiscal year 2023/24, with a gradual recovery thereafter. The statement attributed this trend to the global economic slowdown and a downward revision of the outlook.
Headline inflation also exhibited a deceleration, dropping to 34.6% in November from a record 38.0% in September. In light of these economic indicators, the MPC concluded, “In light of the above, the MPC decided that current policy rates remain appropriate at this juncture.”
While a poll of 14 analysts had a median forecast predicting the MPC to maintain rates, six analysts had expected a potential hike ranging from 100 to 300 basis points. The decision comes in the aftermath of the presidential election held from December 10 to 12, which secured President Abdel Fattah al-Sisi a third, six-year term. Contrary to some analysts’ expectations for an immediate rate increase following the election, the MPC opted to sustain the existing policy rates, possibly deferring significant economic measures until after the electoral process.
Ref: Reuters
