CAIRO: The Central Bank of Egypt (CBE) decided in a late Thursday meeting to keep the overnight deposit and lending unchanged at 8.75 percent and 9.75 percent respectively.
The bank’s Monetary Policy Committee (MPC) also maintained the rate of the CBE’s main operation and the discount rate at 9.25 percent each, the CBE said in a statement posted on its website.
In a previous meeting in January, the MPC slashed all policy rates by 50 basis points each. This was the first action since raising policy rates by 100 basis points each last July, in an attempt to control soaring inflation after the government slashed fuel subsidies by up to 78 percent.
“Headline CPI increased by 0.99 percent (m/m) in January compared to a decline of 0.07 percent (m/m) in December. The annual rate declined to 9.66 percent in January from 10.13 percent in December, supported by the favorable base effect from last year,” said the CBE.
It added: “Real GDP jumped significantly in 2014/15 Q1, registering at 6.8 percent the highest annual growth rate since 2007/08 Q4. This came after 2013/14 FY real GDP growth rate recorded 2.2 percent.”
The Central Bank cited the expansion in the economic activity during 2014/2015 Q1 to the “continuous growth in the manufacturing sector and the expansion of tourism activities.”
Also investment continued to improve for the 3rd consecutive quarter, said the CBE, predicting that investments in domestic mega projects such as the Suez Canal are to boost economic growth.
Shortly after January’s interest rate cut, the CBE began to let the Egyptian pound depreciate against the U.S. dollar in 10 consecutive depreciations in a fight against the black market starting Jan. 18.
Over the past three weeks, the pound has held steady against the dollar officially, but strengthened on the black market as it was changing hands at (7.65 -7.70) EGP per dollar, a very close level to the official market as banks now sell the hard currency at 7.63 EGP.
Meanwhile, banking experts urged the central bank to increase the interest rate on local currency deposits to combat dollarization and reduce cash liquidity, in order to restrain inflation pressures that may occur due to the local currency slip against the dollar in a country importing more than 60 percent of its needs.