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Egypt’s central bank keeps key interest rates steady

Egypt interest rates Reuters/Mohamed Abd El Ghany
The economy grew by an annual 3.9% in the last quarter of 2022 as well as the first quarter of 2023

Egypt’s central bank, as widely expected, left its key overnight interest rates unchanged on Thursday, saying both economic growth and core inflation were slowing.

The bank kept its lending rate at 20.25 percent and its deposit rate at 19.25 percent.

The median forecast in a poll of 17 analysts had been for the bank’s monetary policy committee (MPC) to leave rates steady. Five analysts had expected a hike of 100 basis points (bps) and another analyst a hike of 200 bps.

The MPC said gross domestic product grew by 3.9 percent in the January-March quarter, bringing GDP for the first nine months of fiscal 2022/23 to 4.1 percent. The fiscal year ends on June 30.

“Leading indicators for 2023 Q2 point towards a moderation of real GDP growth,” the MPC said.

“Real GDP growth is expected to slow down in fiscal year 2022/23 compared to the previous fiscal year, before picking up gradually over the medium term.”

In March, a spokesperson for the presidency said Egypt was targeting GDP growth of five percent in 2023/24.

Some analysts had believed the central bank might consider raising rates to help tame inflation, which was higher than forecast in August.

Annual urban consumer price inflation rate surged to a record 37.4 percent in August from 36.5 percent in July, also a record, the statistics agency Capmas said last week.

But core inflation, which cuts out volatile items, fell to 40.4 percent in August from 40.7 percent in July and a record 41 percent in June.

“Inflation dynamics for both July and August 2023 reflect mainly the combined effect of adverse weather conditions further amplifying the seasonal increase in prices of agricultural products as well as supply chain disruptions,” the MPC said.

The MPC said it was targeting average inflation of five to nine percent by 2024.