To calm inflation, a “hot” meeting of the Egyptian Central Bank...

To calm inflation, a “hot” meeting of the Egyptian Central Bank...
To calm inflation, a “hot” meeting of the Egyptian Central Bank...

The Central Bank of Egypt will discuss interest rates during its meeting next Thursday, with varying expectations, in light of the rise in inflation last month.

Economists expected the Central Bank of Egypt to decide to fix interest rates, to remain unchanged for a whole year.

Analysts confirmed that the Central Bank of Egypt, in its meeting next Thursday, is striving to attract investments and calm inflation, so it will fix interest rates.

All but one of the 18 analysts surveyed believed that the central bank would keep interest rates stable at the regular meeting of the Monetary Policy Committee.

The lending rate has been stable at 9.25%, while the deposit rate has been at 8.25% since last November.

interest rates

The Central Bank of Egypt cut key interest rates by 50 basis points in both September and November, after cutting them by 300 basis points in March 2020 to face the repercussions of the Corona virus pandemic.

Real interest rates in Egypt are at their lowest levels since July 2014, but they remain among the highest in the world, which helps in attracting investment in treasury tools.

Egypt’s current account deficit widened to $18.4 billion in the fiscal year ending in June 2021, from $11.2 billion a year ago after a sharp drop in tourism revenues, while the trade deficit increased to $42.06 billion from $36.47 billion.

The annual inflation of consumer prices in cities jumped to about 6.6% last September, compared to about 5.7% last August.

And the inflation rate last month, the highest level since January 2020, but it remains within the target range of the central bank, which ranges from 5 to 9 percent.

Egypt’s economy recovered from the worst repercussions of the Corona virus pandemic, with gross domestic product growth of 7.7% in the quarter ending at the end of last June, compared to a contraction of 1.7% in the same period last year, according to government data.

A Reuters poll published last week expected growth of 5.1% in the current fiscal year, and that it would accelerate to 5.5% in the next two years as tourism continued to recover, and the repercussions of the pandemic receded.

One analyst, Wael Ziada of Zilla Capital, expected the central bank to raise interest rates by 50 basis points in response to global supply chain bottlenecks.

Government expectations

The Egyptian government confirmed that the initial reading of GDP growth for the fiscal year 2020/2021, which ended on June 30, is about 3.3%.

Egypt expects a growth of 5.4% for the current fiscal year 2021/2022, which began last July.

The International Monetary Fund raised its forecast for the growth of the Egyptian economy during 2021, while lowering its estimates for the growth of the global economy.

In its latest World Economic Outlook report, the IMF expected Egyptian GDP growth in 2021 at 3.3%, up from the fund’s previous forecast of 2.5% last April.

Last June, the World Bank commended the Egyptian government for adopting more reform steps during 2021 in order to address the repercussions of the pandemic.

At the time, he expected in the World Economic Outlook Report, June issue, a rise in the growth of the Egyptian economy during 2022 and 2023, recording 4.5% and 5.5%, respectively.

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