The MPC expect global financial conditions to remain accommodative and supportive of economic activity over the medium-term
Closing the year with their last meeting of 2021, the Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) announced that it will be keeping interest rates on hold for the 9th consecutive meeting.
During Thursday’s meeting, the MPC kept the overnight deposit rate, overnight lending rate, and the rate of the main operation unchanged at 8.25%, 9.25% and 8.75%, respectively.
The decision was based on global economic activity and recovery, particularly with the Omnicron variant spreading and continued global supply chain issues, and the possibility of sooner-than-expected US rate hikes in 2022.
According to a statement, they expect global financial conditions to remain accommodative and supportive of economic activity over the medium-term, with international oil prices increasing at a slower pace and select mineral commodities prices have begun to decrease.
Against this background, the MPC decided that keeping policy rates unchanged remains consistent with achieving the inflation target of 7% (±2%) on average in 4Q 2022 and price stability in medium term.
The MPC said in a statement that the annual headline urban inflation declined in October and November 2021, to 6.3% and 5.6%, respectively, from 6.6% in September.
The decline came supported by favorable base effects in November 2021 stemming from the transitory supply shock witnessed in tomato prices during November 2020. “Hence, the deceleration in November 2021 was driven by the lower annual contribution of food items, which more than offset the higher annual contribution of non-food items,” the CBE explained.
The annual food inflation declined in November 2021 for the first time since April 2021, to record 8.1% from 11.6% in October 2021, due to the decline in the annual contribution of volatile food items, despite higher annual contribution of core and regulated food items.
On the other hand, annual non-food inflation increased to 4.5% in November 2021 from 4.0% in October 2021, mainly reflecting higher annual contribution of rental values as well as higher prices of cafes and restaurants.
Meanwhile, annual core inflation continued to increase, for the third consecutive month, to record 5.2 and 5.8% in October and November 2021, respectively, from 4.8% in September 2021 partially affected by unfavorable base effects.
