The Monetary Policy Committee (MPC) decided to keep the Central Bank of Egypt’s (CBE) overnight deposit rate, overnight lending rate and the rate of the main operation unchanged at 16.75%, 17.75% and 17.25%, respectively. The discount rate was also kept unchanged at 17.25%. The decision came in line with our expectations. The MPC’s statement outlined the drivers of the decision despite the acceleration in inflation in the past two months, saying that “given the contained underlying inflationary pressures and the transitory nature of the supply shock related to select fresh vegetables, the MPC decided to keep policy rates unchanged.” The statement also noted that this supply shock might cause a deviation from the announced inflation target of 13% +/-3% by 4Q18. Finally, the statement reiterated the CBE’s position that “current policy rates remain in line with achieving single digit inflation as soon as the effects of fiscal consolidation measures dissipate.”

Mohamed Abu Basha