Egypt's central bank left its key policy rates unchanged for the third time, saying the current rates are consistent with the outlook for inflation and achieving the target of 13 percent, plus/minus 3 percentage points, in the fourth quarter of this year.
The Central Bank of Egypt (CBE) has kept its key rates steady since the last cut in March while inflation continues to decelerate and has been below the upper limit of the target range since February.
Egypt's inflation rate has come down sharply since a record high of almost 33 percent in July 2017 though the headline rate rose slightly in June and July due to higher regulated prices, such as electricity, tobacco and government fees, and some volatile food items.
In July consumer price inflation eased to 13.5 percent from 14.4 percent in June.
Core inflation, however, has continued to fall for 12 months in a row and fell further to 8.54 percent in July, the lowest rate since March 2016.
Inflation surged last year after the government slashed subsidies to energy and raised taxes in connection with a US$12 billion International Monetary Fund (IMF) aid package.
In November 2016 the central bank also floated the pound, which quickly lost more than half its value, boosting import prices and thus inflation.
In response the CBE raised its rates sharply but this year it has cut the rate by a total of 200 basis points following cuts in February and March.
The CBE kept its overnight deposit rate, the overnight lending rate and the rate on the main operation at 16.75 percent, 17.75 percent and 17.25 percent, respectively.
In May last year the CBE set a target for inflation of 13 percent, plus/minus 3 percentage points, for the fourth quarter of 2018 and then single digits thereafter after the temporary effect of fiscal supply shocks dissipates.
The CBE said Egypt's economy had stabilized in the second quarter of this year at the growth rate that was seen in the first quarter, driven by foreign demand and domestic investments.
Egypt's Gross Domestic Product expanded by an annual 5.4 percent in the first quarter of this year, up from 5.3 percent in the fourth quarter of last year, for the seventh consecutive quarter of accelerating growth.
In July the IMF said Egypt's economic situation had continued to improve and the near-term growth outlook is favorable, supported by a recovery in tourism and natural gas production.
The IMF forecast economic growth in the 2017/18 financial year, which ended July 1, of 5.2 percent, rising to 5.5 percent in 2018/19.
Average inflation was forecast to decline to 14.4 percent in 2018/19 from an estimated 20.8 percent last financial year.
- African Markets
