CAIRO: In its meeting Monday, the Monetary Policy Committee (MPC) at the Central Bank of Egypt decided to maintain theovernight deposit rate at 8.25 percent, the overnight lending rate at 9.25 percent, and the rate of CBE’s main operation at 8.75 percent
CBE’s discount rate was also kept unchanged at 8.75 percent, according to a press statement on CBE’s official homepage
MPC had previously decided in February to maintain the same rates
In March, the Consumer Price Index of the CBE noted a 0.68 percent increase in monthly inflation to record 9.82 percent compared to 9.76 percent during the same period in February, CBE’s statement said, attributing the increase in inflation rates to the increase in the prices of goods.
Moreover, the CPI also noted a light increase in the Gross Domestic Product to 1.40 percent during the second quarter of 2013-2014 compared to 1.04 during the first quarter
Commenting on MPC’s decision to maintain the interest rates, Ahmed Qura, former Head of Al-Watany Bank, said CBE takes into consideration the inflation rate along with the Gross Domestic Product while defining the interest rate, as the interest affects the costs, whereby the cost increases proportionately with the interest rate, and vice versa, Qura told The Cairo Post
Through maintaining and decreasing the interest rate, CBE aims to control the rate of inflation, to attract more investment, decrease production costs and increase economic activity, Qura said, pointing out that this will only be achieved after completing the roadmap, along with establishing stability and security in Egypt
“Decreasing the interest rate will decrease the cost rate,” he said pointing out that the decrease in costs will be directly proportional to the inflation rate, and as such CBE uses the interest rates to control inflation
Moreover, “maintaining and decreasing the interest rate will benefit CBE itself, whereby it will decrease the interest rates of the government’s treasury bills and bonds ,offered by the CBE to provide the needed finances for the government,” he explained
As the increase in interest rate affects the flow of investment, increasing governmental burdens from increasing interest for treasury bills and bonds and pushing the inflation rates, CBE has decided to maintain the interest rate, he concluded.