It added that the decision was consistent with achieving price stability over the medium term
The Central Bank of Egypt’s Monetary Policy Committee (MPC) has decided to maintain key interest rates for the 3rd time in a row, while increasing the required reserve ratio.
Keeping key interest rates and increasing the reserve ratio will work “a catalyst, complementing the tightening stance that the CBE is maintaining, by calibrating liquidity conditions,” explained the CBE in a statement.
It added that the decision was consistent with achieving price stability over the medium term.
The MPC kept the overnight deposit rate, overnight lending rate and the rate of the main operation unchanged at 11.25%, 12.25%, and 11.75%, respectively. The discount rate was also kept unchanged at 11.75%.
The required reserve ratio rate was raised to 18%, up from 14%.
Global financial conditions are expected to tighten further as major central banks continue to raise policy rates and reduce asset purchase programs with the aim of containing increased inflationary pressures in their respective countries, the CBE explained, also pointing out that global economic activity has been slowed due to the Russia/Ukraine conflict.
However, global commodity prices, such as international prices of oil, slightly declined as a result of weakening demand due to global recession expectations.
On a local scale, the CBE noted that Egypt’s economic activity grew by 3.2% during Q2 of 2022, pointing out that FY2021/2022 registered a growth rate of 6.6%, compared to 3.3% in the previous fiscal year.
“Latest available data for the first nine months of the fiscal year shows that GDP growth was mainly driven by the private sector, particularly non-petroleum manufacturing, tourism and trade. Meanwhile, public sector activity was supported by natural gas extractions, Suez Canal and the general government. Moreover, select leading indicators continue to register positive growth rates in 3Q of 2022. However, economic activity is expected to grow at a slower rate than previously projected, given the uncertainty and negative spillovers from the global scene,” the CBE further explained.