On Thursday, the Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) decided to keep key interest rates for the third time unchanged since the initial three percent hike following the onset of the Russian-Ukrainian war.
The MPC kept the overnight deposit rate, overnight lending rate and the rate of the main operation unchanged at 11.25 percent, 12.25 percent, and 11.75 percent, respectively.
The discount rate was also kept unchanged at 11.75 percent.
On the other hand, the MPC raised the required reserve ratio to 18 percent, up from 14 percent.
“This works as a catalyst, complementing the tightening stance that the CBE is maintaining, by calibrating liquidity conditions,” the CBE said in a statement.
On the global level, the CBE said that forecasts for global economic activity have been dampened due to the impacts of the conflict between Russia and Ukraine.
It added that the global financial conditions are predicted to tighten further as major central banks continue to hike the interest rates and reduce asset purchase programmes with the aim of containing increased inflationary pressures in their respective countries.
In contrast, global commodity prices, such as international prices of oil, have slightly declined, because of weakening demand due to global recession expectations, according to the CBE.
Locally, the CBE explained that economic activity has grown by 3.2 percent in the second quarter of 2022, noting that FY2021/22 registered a growth rate of 6.6 percent, compared to 3.3 percent in the previous fiscal year.
“Latest available data for the first nine months of the fiscal year shows that GDP growth was mainly driven by the private sector, particularly non-petroleum manufacturing, tourism and trade. Meanwhile, public sector activity was supported by natural gas extractions, Suez Canal and the general government. Moreover, select leading indicators continue to register positive growth rates in 3Q of 2022. However, economic activity is expected to grow at a slower rate than previously projected, given the uncertainty and negative spillovers from the global scene,” the CBE further explained.