On June 23, the Central Bank of Egypt made the decision not to change interest rates. The Monetary Policy Committee (MPC) made the decision to keep the central bank’s overnight deposit rate, lending rate, as well as the rate of the main operation on hold at 11.25%, 12.25%, and 11.75%, respectively.
Importantly, the Discount rate Was also kept Unchanged at 11.75%.
The committee referred to the slowdown of the global economic activity as a result of the war between Russia and Ukraine, noting that trade sanctions imposed on Russia and corresponding supply-chain bottlenecks have elevated global commodity prices, such as international prices for oil as well as wheat.
Among serious problems, the Central Bank of Egypt mentioned lockdowns in China. The situation in the world’s second-largest economy is far from ideal. For example, Beijing’s economy was slammed in May as it contented with Covid outbreaks, a sign that government curbs to contain the virus had a significant impact even though it managed to avoid a citywide lockdown like Shanghai’s.
Retail sales in Beijing fell about 26% in May from a year earlier, data from the municipal statistics bureau showed. That is worse than any other provincial-level jurisdiction that has published monthly data so far, except for Shanghai, where spending dropped some 37%.
Industrial output in the country’s capital fell nearly 40% in May, worse than Shanghai’s almost 28% drop.
Locally, the committee stated that domestic economic activity continued to expand in 2022 Q1, albeit at a slower pace, registering a preliminary growth figure of 5.4%, compared to 8.3% in the fourth quarter (Q4) of 2021.
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Central Bank of Egypt and the country’s Economy
According to the committee’s statement, the economic activity revealed a sectoral growth during the Q4 of 2021.
The witnessed softening in economic growth is ascribable to a number of factors, most notably the impact of war in Ukraine, as well as the diminishing of the positive base effect observed during the previous three quarters, the committee added.
Economic activity during the second quarter of 2022 showed a normal base with expectations to expand at a slower than projected pace. This is mainly a result of the unfavorable spillovers emanating from the war in Ukraine.
The committee noted the decline of the unemployment rate during the first quarter of 2022 to reach 7.2%.
In the meantime, annual headline urban inflation continued to increase, but at a slower pace, to record 13.5% in May 2022. Moreover, annual core inflation – which excludes volatile food and regulated items – also witnessed a slower pace of increase for the second month in a row. It continued its upward trend to record 13.3% in May 2022 from 11.9% in April, according to the data.
Last month, the committee decided to raise the overnight deposit rate, overnight lending rate, and the rate of the main operation by 200 basis points to 11.25%, 12.25%, and 11.75%, respectively. The discount rate was also raised by 200 basis points to 11.75% by the Monetary Policy Committee.