News 5 reasons behind the central bank’s decision to fix...

5 reasons behind the central bank’s decision to fix the interest rate

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The Central Bank revealed the reasons for keeping the interest rates in force in Egypt unchanged, and the bank’s monetary policy committee had decided at its meeting yesterday, Thursday, to keep interest rates at 12.25% and 13.25% for deposits and lending, respectively, for the second time in a row where the committee had previously Fixing the interest rate at its previous meeting, which is held in a quarterly role.

Maintaining a stable inflation rate

The most important reason for fixing the interest rate was to maintain the stability of the low inflation rates announced by the bank during January, which amounted to 7.2%. The central bank aims to reach them (9% ± 3%) by the end of 2020, and inflation rates are directly affected by the interest rate.

Maintaining high growth rates

Egypt recorded a growth rate of 5.6% during the second half of 2019, driven by the reduction of the interest rate by the central bank by about 3% during the same period, and the bank aims to maintain the rate of growth or its rise during the year 2020, and a change in the interest rate may reflect negatively on the growth rate in the case of Part of the Egyptian investors and savers withdraw their deposits in the Egyptian banks, the main financier of the development projects.

Corona Virus

The bank also revealed that, despite the signs of recovery in the global economy during the past year, the appearance of the Corona virus may cast a shadow on the growth rates during 2020, and the bank wants to spare the Egyptian monetary policies the turmoil or the arrival of symptoms of anxiety in the event of a lower interest rate and part withdrawal Bank deposits as a result of fears of the spread of the disease globally.

Low unemployment rate in Egypt

The bank pointed to another reason for fixing the interest rate, which is maintaining low unemployment rates, which recorded 8% at the end of 2019, after it reached 7.5% in the middle of last year, and this slight increase raised the bank’s fears that a new rate cut may reflect negatively on operations. Employment and creation of new job opportunities.

The low oil price may be temporary

The bank also revealed that the current low price of oil due to the abundance of supplies may be affected negatively due to political strikes in the region, from instability in Iraq, the American-Iranian conflict in the Gulf, as well as the heated conflict in Libya, which witnessed a dangerous development with Turkey entering the conflict arena with the support of one of its parties, Which may cause the suspension of some supplies of those producing countries and OPEC member.

The five reasons favored maintaining the stability of the interest rate, with the bank emphasizing its careful monitoring of all variables on the regional and global scene and its willingness to intervene in the event that economic indicators change to guide monetary policy in a manner that maintains the high performance rates of the Egyptian economy in the recent period.

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