{"id":165312,"date":"2020-02-20T15:55:00","date_gmt":"2020-02-20T20:55:00","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=165312"},"modified":"2020-02-20T15:35:19","modified_gmt":"2020-02-20T20:35:19","slug":"egypt-maintains-rates-to-achieve-inflation-target","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2020\/02\/egypt-maintains-rates-to-achieve-inflation-target\/","title":{"rendered":"Egypt maintains rates to achieve inflation target"},"content":{"rendered":"
February 20, 2020<\/div>
\r\n<\/div><\/div>

By CentralBankNews.info<\/u><\/a><\/p>\n

\u00a0 Egypt’s central bank left its key interest rates unchanged for the second consecutive month, saying it had lowered its rates by 350 basis points during the second half of last year and keeping them steady remains consistent with achieving its inflation target and supporting lower inflation in the medium term.<\/span><\/p>\n

\u00a0 \u00a0\u00a0 The Central Bank of Egypt (CBE) left its overnight deposit rate, the overnight lending rate, the rate of the main operation and the discount rate steady at 12.25 percent, 13.25 percent, 12.75 percent and 12.75 percent, respectively.<\/span><\/p>\n

\u00a0 \u00a0\u00a0 The decision to maintain rates was expected by roughly half of analysts’ surveyed as CBE was not considered to be in any rush to lower rates while inflation is picking up.<\/span><\/p>\n

\u00a0 \u00a0\u00a0 CBE has cut its rate six times and by a total of 650 basis points since February 2018, including four cuts of 450 basis points in 2019. From August through November the rate was cut 350 points.<\/span><\/p>\n

\u00a0 \u00a0\u00a0 Egypt’s headline inflation inched up to 7.2\u00a0<\/span>percent\u00a0in January from 7.1\u00a0percent in December, mainly due to higher food prices such as poultry and\u00a0fresh vegetables, while\u00a0<\/span>core inflation rose to 2.7\u00a0percent from 2.4 percent.<\/span><\/p>

\r\n
\r\n

Free Reports:<\/p><\/div>\r\n

\r\n

<\/a>\r\n\t Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p>

\r\n
\r\n
\r\n

<\/a>\r\n\t Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p>

\r\n<\/div>\r\n

\r\n
<\/div>\n

\u00a0<\/span>\u00a0 \u00a0\u00a0 Despite this recent uptick, inflation\u00a0still remains well below CBE’s target of 9.0 percent, plus\/minus 3 percentage points, for the fourth quarter of 2020.<\/span><\/p>\n

\u00a0 \u00a0\u00a0 CBE said its monetary\u00a0policy was still supporting private domestic demand,\u00a0which has outpaced exports as the main driver of\u00a0economic activity in the first\u00a0three quarters of last year, driven by growth in private investments.<\/span><\/p>\n

\u00a0 \u00a0\u00a0 Egypt was hit hard by the Arab Spring in 2011, which ended Hosni Mubarak’s 30-year rule, as it scared off tourists and foreign investors, resulting in a persistent shortage of\u00a0foreign currency.<\/span><\/p>\n

\u00a0 \u00a0\u00a0 But helped by the appointment of Tarek Amer as CBE governor in November 2015 – he reformed\u00a0the banking system and the foreign exchange market – and a 2016 agreement with the\u00a0International Monetary Fund (IMF), Egypt’s\u00a0economy has rebounded.<\/span><\/p>\n

\u00a0 \u00a0\u00a0 Egypt’s gross domestic product\u00a0grew an annual 5.6\u00a0percent in the third quarter of last year, slightly down from 5.7 percent in the second quarter but up from 5.5 percent in the year ago quarter.<\/span><\/p>\n

\u00a0 \u00a0\u00a0 “However, disruptions to global\u00a0economic activity\u00a0following the recent coronavirus outbreak could weigh on the global\u00a0economic outlook, at\u00a0least in the\u00a0near term,” CBE said, adding oil prices have declined from lower demand but still remain volatile due to geopolitical risks.<\/span><\/p>\n

\u00a0 \u00a0\u00a0 Since January last year the Egyptian pound has steadily appreciated, with its rise\u00a0accelerating this month.\u00a0<\/span><\/p>\n

\n
\n
\n

\u00a0 \u00a0 \u00a0Today the pound eased after the\u00a0policy decision to trade at 15.57 to the U.S. dollar to be up 2.8 percent since the\u00a0start of this year and some 22 percent since the pound lost about half its value in the wake of the decision to float the pound in November 2016.<\/span>
\n\u00a0 \u00a0 \u00a0The collapse in the pound in 2016 boosted inflation to 33\u00a0percent in July 2017 and CBE quickly raised its key interest rate by 400 basis points that year to curb the pass-through of higher import prices to overall inflation.<\/span>
\n\u00a0 \u00a0 After the initial surge in\u00a0inflation, it began decelerating in the second half of 2017 and fell to 3.1 percent in October last year – the lowest since December 2005 – before picking up speed in the last\u00a0three months.<\/span>
\n<\/a>
\n
\n<\/span>
\n\u00a0 \u00a0 \u00a0The\u00a0Central Bank of Egypt issued the\u00a0following statement:<\/span>
\n
\n<\/span><\/p>\n

\n
\n
“The Monetary Policy Committee (MPC) decided to keep\u00a0<\/span>the Central Bank of Egypt\u2019s (CBE)\u00a0<\/span>overnight deposit rate, overnight lending rate, and the rate of the main operation unchanged at 12.25 percent, 13.25 percent, and 12.75 percent, respectively. The discount rate was also kept unchanged at 12.75 percent.<\/span>
\nAnnual headline urban inflation recorded 7.2 percent in January 2020 compared to 7.1 percent in December 2019, as monthly inflation recorded 0.7 percent in January 2020 compared to 0.6 percent in January 2019. Monthly headline inflation in January 2020 was mainly driven by higher food prices as well as by higher non-food prices but with a lesser extent. Meanwhile, annual core inflation increased to 2.7 percent in January 2020 compared to 2.4 percent in December 2019. Annual inflation rates came in line with the expectations of the Central Bank of Egypt.<\/span>
\nReal GDP growth stabilized around 5.6 percent in 2019 H2 compared to its level in FY2018\/19. Monetary policy continued to support private domestic demand, which has outpaced net exports as the main driver of economic activity in the first three quarters of 2019, driven by the acceleration in private investment growth.<\/span>
\nWhile the expansion of global economic activity stabilized, financial conditions and uncertainty regarding trade policies eased somewhat. However, disruptions to global economic activity following the recent coronavirus outbreak could weigh on the global economic outlook, at least in the near term. Meanwhile, international oil prices declined due to lower demand, yet remain subject to volatility due to potential supply-side factors that include geopolitical risks.<\/span>
\nRegarding the labor market, the unemployment rate recorded 8.0 percent in 2019 Q4 compared to 7.8 percent and 7.5 percent in 2019 Q3 and Q2, respectively. Nevertheless, employment continued to recover on a quarterly basis for the fourth consecutive quarter.<\/span>
\nAgainst this background, and following the cumulative reduction of 350 basis points during the second half of 2019, the MPC decided that keeping key policy rates unchanged remains consistent with achieving the inflation target of 9 percent (\u00b13 percentage points) in 2020 Q4 and supporting the disinflation path over the medium-term. The MPC closely monitors all economic developments and will not hesitate to resume its easing cycle subject to further moderation of inflationary pressures.”<\/span>
\n
\n<\/span>\u00a0 \u00a0 www.CentralBankNews.info<\/a><\/span>
\n
\n<\/span><\/div>\n<\/div>\n<\/div>\n

\u00a0<\/span><\/p>\n<\/div>\n<\/div>\n<\/div>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By CentralBankNews.info \u00a0 Egypt’s central bank left its key interest rates unchanged for the second consecutive month, saying it had lowered its rates by 350 basis points during the second half of last year and keeping them steady remains consistent with achieving its inflation target and supporting lower inflation in the medium term. \u00a0 \u00a0\u00a0 […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-165312","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/165312","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=165312"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/165312\/revisions"}],"predecessor-version":[{"id":165314,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/165312\/revisions\/165314"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=165312"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=165312"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=165312"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}