Why has the central bank fixed interest rates for the fourth time in a row?

04:31 PM

Wednesday 28 April 2021

Books – Mustafa Eid:

The Monetary Policy Committee of the Central Bank of Egypt decided at its meeting, today, Wednesday, to keep interest rates unchanged, to reach 8.25% for deposits and 9.25% for lending, for the fourth time in a row, which was in line with the expectations of most economists.

The committee had fixed interest rates during its meeting last March for the third time, after it had reduced them to 4% in 2020 over 3 times, one of which witnessed an exceptional reduction of 3% in March before last.

The Central Bank’s Monetary Policy Committee said, in a statement today, that the central bank’s basic return rates are appropriate at the present time, and are consistent with achieving the targeted inflation rate of 7% (± 2 percentage points) on average, during the fourth quarter of 2022 and stabilizing Prices are in the medium term.

It added that the annual rate of general urban inflation stabilized at 4.5% in March and February 2021, after recording 4.3% in January 2021.

She stated that this stability came as a result of the increase in the annual contribution of food commodity inflation, which was limited by the decrease in the annual contribution of non-food commodities inflation.

According to the statement, the annual rate of food commodity inflation increased in March 2021 after stabilizing in February 2021, to reflect the increase in the contribution of fresh vegetables and fruits, in addition to basic food commodities, but to a lesser extent, in conjunction with the seasonal pattern for each of them, while non-food commodity inflation decreased, supported by The relative stability of prices and the positive effect of the base period.

At the same time, the annual rate of core inflation rose slightly to 3.7% in March 2021, compared to 3.6% in February 2021.

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The committee said that preliminary data indicated that the real GDP growth rate recorded 2% during the fourth quarter of 2020, compared to 0.7% during the third quarter of the same year.

She added that, in addition, some initial indications point to the resumption of the gradual recovery towards levels recorded in the pre-outbreak of the Coronavirus pandemic. At the same time, the unemployment rate stabilized at 7.2% during the fourth quarter of 2020, compared to 7.3% during the third quarter of the same year.

At the global level, economic activity continued to recover, albeit unevenly at the level of different sectors and countries, in light of the continuing impact of the spread of the Coronavirus pandemic, according to the statement.

The committee indicated that the recovery of global economic activity depends on the developments of the spread of the pandemic, in addition to the effectiveness, abundance and speed of distributing vaccines for the Corona pandemic, and it is expected that appropriate financial conditions that support global economic activity will continue in the medium term.

At the same time, global prices for foodstuffs and other primary commodities have increased, and world oil prices are still revolving around relatively high levels compared to their levels after the spread of the Coronavirus pandemic, according to the committee

She explained that the rise in oil prices was driven by developments from the supply and demand side, which will affect future global price paths for oil.

The Monetary Policy Committee affirmed that it closely follows 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.

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