Egypt’s central bank keeps key interest rates unchanged

Egypt’s central bank kept its key interest rates unchanged during its monetary policy committee (MPC) meeting on Thursday, the bank said in a statement.

The committee kept the overnight lending rate at 9.25 percent and the overnight deposit rate at 8.25 percent for a sixth consecutive time, after cutting rates in September and November.

Egypt has some of the highest real interest rates in the world, which has helped to attract investment in treasuries but discouraged corporate borrowing.

Fifteen analysts polled by Reuters predicted that the bank would keep rates unchanged as liquidity in the market and slowly rising inflation reduce pressure to adjust rates.

The MPC noted that Egypt’s headline inflation had inched up to 4.9 percent in June from 4.8 percent in May, “reflecting an unfavorable base effect” it said would continue to affect annual inflation rates.

The MPC in December narrowed its inflation target to 5 percent-9 percent from the previous 6 percent-12 percent. It said on Thursday that the unchanged rates were consistent with achieving that level.

Egypt’s GDP grew 2.8 percent in the 2020/21 fiscal year according to preliminary calculations, down from 3.6 percent the previous year, the MPC noted.

However, sectoral growth was picking up particularly in the trade, construction, communications and natural gas sectors, as global economic activity recovers from the coronavirus pandemic, it said.

The central bank twice lowered its benchmark rate by 50 bps in September and November last year, and cut it by 300 bps at the outbreak of the pandemic in March 2020. Rates are at their lowest since July 2014.