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CBE keeps rates on hold

CBE keeps rates on hold

ArabFinance: The Central Bank of Egypt (CBE) left rates unchanged for a fourth consecutive meeting as policymakers looked to keep Egypt’s carry trade the most attractive in the world and anticipated heightened inflation, according to the bank’s recent statement.

The Monetary Policy Committee (MPC) decided to keep the CBE’s overnight deposit rate, overnight lending rate, and the rate of the main operation unchanged at 8.25%, 9.25%, and 8.75%, respectively.

The discount rate was also kept unchanged at 8.75%.

Furthermore, annual headline urban inflation stabilized at 4.5% in March and February 2021, after registering 4.3% in January 2021.

The MPC attributed that the stabilization in the annual headline inflation rate to the combined effect of the higher annual contribution of food items, and the lower annual contribution of non-food items.

By the end of March, annual food inflation increased after remaining stable in February 2021, reflecting the higher annual contribution of volatile food items as well as core food items, but by a lesser extent, in line with their seasonal patterns.

“Global economic activity continues to display signs of recovery and resilience in the face of the COVID-19 pandemic, albeit with varying paces across countries and economic sectors,” the statement highlighted.

Global economic and financial conditions are expected to remain accommodative and supportive of economic activity over the medium term.

International food and other commodity prices have continued to rise, as international oil prices remained elevated relative to their post-pandemic levels.

The changes in international oil prices were driven by demand and supply-side developments, which continue to weigh on their future price trajectories.

The MPC also decided that keeping policy rates unchanged remains consistent with achieving the inflation target of 7% (±2 percentage points) on average in 2022 Q4 and price stability over the medium term.

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