The Central Bank of Egypt’s (CBE) Monetary Policy Committee (MPC) decided to maintain interest rates at their current levels, according to a statement issued by the CBE on Thursday.
On April, The MPC decided to cut interest rates by by 100 basis points (1%). For the second time in 2018, each of the overnight deposit rate, the overnight lending rate, and the rate of CBE main operation by 100 basis points to 17.75%, 18.75%, and 18.25% respectively. The discount rate was also reduced by 100 basis points to 18.25%.
According to the statement issued by the MPC, the annual headline inflation continued to decline in March and April 2018 to record 13.%, while annual core inflation continued to decline in March to 11.6%, and remained roughly unchanged in April.
Moreover, the increase in international oil prices gained momentum in April and May 2018, leading to the materialization of an upside risk to the domestic inflation outlook. Nevertheless, the outlook remains consistent with achieving the inflation target of 13% (±3 percent) in 2018 Q4 and single digits thereafter.
Consequently, the MPC decided to keep the CBE’s key policy rates unchanged is to achieve the targeted disinflation path, ahead of the upcoming fuel subsidies in FY2018/19.
Since the currency floatation in November 2016, interest rates has increased by 4% (400 basis point) before February, to curb Egypt’s soaring inflation. Inflation has reached a 30-year high of 33% year-over-year in July 2017 following the fuel subsidies cuts, currency devaluations, and implementation of VAT as part of the economic reform programme adopted by the government and blessed by the International Monetary Fund.