(Reuters) – The Central Bank of Egypt (CBE) kept its key overnight interest rates unchanged on Thursday, saying commodity prices appear to be falling and economic growth is likely to recover in the fiscal year that begins next week.
As expected, the bank’s Monetary Policy Committee (MPC) left the lending rate steady at 19.25% and the deposit rate at 18.25%. Not one of 17 analysts polled by Reuters on Monday had forecast a change.
“Leading indicators for 2023 Q1 point towards a slowdown of real GDP growth,” the MPC statement said. “Real GDP growth is expected to slow down in fiscal year 2022/23 compared to the previous fiscal year, before recovering thereafter.”
The MPC said international commodity prices were likely to continue declining.
Headline inflation surged to an annual 32.7% in May, just short of an record high, from 30.6% in April. Month-on-month, inflation jumped to 2.7% from 1.7% in April.
Economic growth meanwhile eased to 3.9% in the fourth quarter of 2022 from 4.4% in the third quarter, the MPC said.
“Leading indicators for 2023 Q1 point towards a slowdown of real GDP growth.”
Expectations of a rate increase were dampened after President Abdel-Fattah al-Sisi last week appeared to rule out any imminent devaluation of the currency, even though the pound has been trading at about 38 to the dollar on the black market compared with the official rate of 30.9 pounds.
Since Russia invaded Ukraine in February last year, causing investors to withdraw billions of dollars from the Egyptian treasury market, the central bank has raised rates by a cumulative 1,000 basis points and allowed the currency to fall by half.
(Reporting by Yomna Ehab and Alaa Swilam; Writing by Patrick Werr; Editing by Jonathan Oatis; Editing by Chris Reese)
