For the third time in a row, the Central Bank of Egypt (CBE) has kept its official interest rates on hold in an effort to balance increasing annual inflation rates, sluggish economic activity, low investment levels and a negative GDP outlook, the bank said on Monday.
Rania Al-Mashat, the assistant governor of the CBE’s Monetary Policy Committee (MPC) said in a statement that the bank will keep the overnight deposit rate, overnight lending rate and the rate of main operations unchanged at 8.25%, 9.25% and 8.75%, respectively, adding that the discount rate will also remain unchanged at 8.75%.
The MPC kept interest rates unchanged for two consecutive times in January and February after cutting it by 50 basis points in December.
According to the CBE, the MPC judged the current rates as “appropriate” given the high prices of several food items and seasonal increase in prices of fruits and vegetables in 1Q 2014, which caused an increase in headline inflation.
According to figures of the Central Agency for Public Mobilization and Statistics (CAPMAS), the annual inflation rate registered 10.2% in March, adding that general food prices and beverages registered a month on month increase of 1.3% as well as a 15.8% increase year on year.
CBE also noted that the manufacturing, construction, tourism and petroleum sectors are affected by modest economic growth rates, which registered 1.2% in 1H FY 2013/2014 compared to 2.1% in the same period in FY 2012/2013.
The economic growth of the current fiscal year is expected to range between 2% to 2.5%. For the next fiscal year, Minister of Planning Ashraf El-Araby announced that the interim government aims to stimulate GDP, to reach between 3% and 3.4%.
