CBE Sets New Date for Reviewing Key Interest Rates

The Central Bank of Egypt (CBE) decided to bring forward the date of the next meeting of the Monetary Policy Committee (MPC) to review key interest rates on Wednesday, April 28, due to the Sinai Liberation Day holiday.

MPC decided in its last meeting in March to keep the 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%.

It kept rates unchanged for the third time in a row at Nov. 2019 rates.

The annual inflation rate in Egypt was 4.5% in March of 2021, unchanged from the previous month. Main upward pressure came from prices of food (1.1% vs -0.5% in February), attributed to the hike in costs of some commodities such as fruits and meat ahead of the Ramadan month.

On a monthly basis, consumer prices inched up 0.6%, the biggest increase in four months.

Expectations on key interest Rates ahead of the meeting

On his part, Maged Fahmy, former head of the Industrial Development Bank (IDB) ruled out that the decision of raising gasoline prices would affect interest rates, explaining that the increase was not huge and linked to the global price and therefore the closest is to keep interest rates unchanged.

Fahmy continued that raising the prices of petroleum products by 25 piastres according to the new pricing will not have a significant impact on the prices, and thus will not really affect the rates of inflation.

He explained that the state of recession imposed by the coronavirus on the global and local markets will push the central bank to keep interest rates steady due to the relative stagnation facing the markets, which affected tourism and export revenues to some extent.

He added that there is also difficulty in reducing interest to preserve foreign investments in treasury bills, pointing out that there are several initiatives for all clients in various sectors with reduced interest from small projects, real estate financing and the industrial sector.

Radwa Al-Swaify, head of the research sector at Pharos Holding For Financial Investments expected that the committee would also fix key interest rates at current levels at this week’s meeting.

She explained that the rise in gasoline prices will lead to stabilization of interest rates, especially that there is no justification for raising the yield in light of the limited impact of the decision on inflation and the central bank’s launch of initiatives with lower interest rates.