The Central Bank of Egypt (CBE) has released a statement mentioning that the Monetary Policy Committee (MPC) decided to maintain the CBE’s overnight deposit rate, overnight lending rate, and the rate of the main operation unchanged at 16.75%, 17.75%, and 17.25%, respectively. The discount rate was also kept unchanged at 17.25%.
The CBE added that the headline inflation declined to 15.7% in November 2018 from 17.7% in October 2018, due to the partial reversal of the supply shock related to select vegetables and a favourable base effect.
Meanwhile, core inflation declined to 7.9% in November 2018 from 8.9% in October 2018, recording the lowest rate since February 2016.
It also pointed out that the global financial conditions continued to tighten, while worldwide trade tensions persisted to weigh on the international outlook. Transnational oil prices recently declined yet remain subject to volatility due to potential supply-side factors.
Moreover, the ministry of finance is targeting to achieve a primary surplus of 2.0% of the GDP in fiscal year 2018/19, up from a preliminary 0.1% in the previous year, and to maintain this surplus thereafter.
The CBE added that in account of the above, and in support of macroeconomic stability, that its inflation target has been set at 9% on average during Q4 of 2020, down from 13% on average during Q4 of 2018. Exogenous factors that are outside the scope of monetary policy may lead to transitory deviations from pre-announced target rates.
Furthermore, current policy rates and the inflation outlook remain in line with achieving the targeted disinflation path. The MPC closely monitors all economic developments and will not hesitate to adjust its stance towards achieving its mandate of price stability over the medium term.
Aliaa Mamdouh, director of Macro and Strategy at Beltone Financial informed Daily News Egypt that the CBE determined their target of inflation during Q4 of 2020 according to the inflation pressure in this period of time, especially the low prices of oil which has a clear impact on declining any inflation pressure on the upcoming year 2019. Moreover, Mamdouh added that their forecasts for the inflation rate during Q4 of 2020 is 11.6% which is in the range of the CBE’s target.
Furthermore, Radwa EL-Swaify, head of Research at Pharos Holding for Financial Investments told Daily News Egypt that the CBE’s forecasts for inflation during Q4 of 2020 according to the price developments for the coming period, and the monetary policies the CBE is going to follow. Furthermore, EL-Swaify added that the volatility of the oil will not reflect badly on the target determined by the CBE, as they are estimating $70 per barrel.