Middle EastEgypt’s central bank keeps overnight rates on hold

Reuters
2 minute read
1/2

Central Bank of Egypt's headquarters is seen amid the coronavirus disease (COVID-19) pandemic in downtown Cairo, Egypt February 25, 2021. REUTERS/Mohamed Abd El Ghany

Egypt’s central bank left its overnight interest rates unchanged on Wednesday, saying inflation had stabilised and the economy was showing signs of recovery after more than a year of the coronavirus pandemic.

The decision, which most analysts had anticipated, leaves real Egyptian interest rates at one of the highest levels in emerging markets.

The central bank's monetary policy committee (MPC) kept the overnight lending rate at 9.25% and the overnight deposit rate at 8.25% for a fourth consecutive time, after cutting rates in September and November.

By comparison, the average yield on a three-month Egyptian treasury bill was 13.135% at an auction this week.

The MPC met one day earlier than initially scheduled after the government moved the Sinai Liberation Day holiday to Thursday from Sunday to give Egyptians a longer weekend.

The MPC said headline inflation had stabilised at 4.5% in February and March, and the global economy was showing signs of recovery.

"Some leading indicators point towards a resumption of recovery towards their pre-pandemic levels," the MPC said in a statement accompanying its decision.

"Meanwhile, the unemployment rate stabilised at 7.2% during 2020 Q4, compared to 7.3% during the previous quarter."

All but one of 20 analysts polled by Reuters predicted the committee would leave rates on hold.

The central bank lowered its benchmark rate by 50 bps in each of September and November and by 300 bps at the outbreak of the pandemic in March 2020. They are now at their lowest since July 2014.

The MPC in December narrowed its inflation target to 5%-9% from the previous 6%-12%.

Our Standards: The Thomson Reuters Trust Principles.