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The Monetary Policy Committee of the Central Bank of Egypt decided, in its meeting, today, to keep the overnight deposit and lending yield rates and the central bank’s main operation rate at 8.25%, 9.25 and 8.75%, respectively. As well as keeping the credit and discount rate at 8.75%.
The central bank said in a statement that the annual rate of general urban inflation decreased to 5.4% in December 2020 from 5.7% in November 2020, mainly driven by the decline in fresh vegetable prices, referring to both the seasonal pattern of fresh vegetable prices, in addition to the evaporation. Part of the November 2020 supply shock to tomato prices.
The statement added: The annual rate of core inflation decreased to 3.8% in December 2020 from 4.0% in November 2020.
The statement explained: “Accordingly, the annual general inflation rate in urban areas recorded an average rate of 5.2% during the fourth quarter of 2020, which is less than the minimum target range of 6% announced in 2018. This deviation from the target range is due to each From the impact of the spread of the Corona pandemic and the accompanying precautionary measures on economic activity, in addition, the Egyptian government has taken several measures to avoid any shortage resulting from the supply of goods in the market, which has also contributed to reducing inflation rates.
The statement said: «Despite the above, and in view of the balance of risks, the Central Bank has taken several measures proactively in order to support economic activity consistent with achieving the goal of price stability in the medium term.
Preliminary data indicates that the real growth rate of the gross domestic product (GDP) recorded 0.7% during the third quarter of 2020, compared to negative 1.7% during the second quarter of the same year.
Some preliminary indicators on the demand side continued to recover during the fourth quarter of 2020. The unemployment rate fell to 7.3% during the third quarter of 2020, compared to 9.6% during the second quarter of the same year.
At the global level, economic activity remains weak despite the easing of global financial conditions, as a result of the negative impact of both the second wave of the spread of the Corona pandemic and the accompanying precautionary measures on the global economic prospects in the near term. On the other hand, the path of global economic recovery depends largely on the effectiveness, availability and speed of distribution of vaccines for the Corona pandemic, which in turn may alleviate the uncertainty prevailing in the medium term.
At the same time, global oil prices continued to rise, driven by developments on the supply side.
In light of the foregoing, the Monetary Policy Committee decided that the basic return rates of the central bank are appropriate at the present time, and are consistent with achieving the target inflation rate of 7% (± 2 percentage points) on average during the fourth quarter of 2022 and price stability in the medium term.
The Monetary Policy Committee closely monitors all economic developments and risk balances and will not hesitate to use all its tools to support the recovery of economic activity, provided that inflationary pressures are contained.
