Egypt .. These are the justifications for setting interest rates for the seventh time

The Monetary Policy Committee of the Central Bank of Egypt announced that the interest rate would be fixed for the seventh consecutive time and for the sixth time in the course of 2021. The Monetary Policy Committee decided to keep the interest rate on deposits and overnight loans at 8.25%, 9.25% and 8.75% respectively, in addition to maintaining the credit and discount rate at the level of 8.75%.

The Central Bank of Egypt indicated that the annual general inflation rate in urban areas was 5.7% in August 2021, compared to around 5.4% in July 2021 and 4.9% in June 2021. At the same time, the annual underlying inflation rate fell slightly to 4.5% in August 2021 compared to 4.6 and 3.8% in July and June 2021, respectively.

He explained that the increase in annual headline inflation rates in July and August 2021 is the result of the negative impact of the base period, as the July and August 2020 inflation rates reflected the impact of the spread of the new coronavirus pandemic. and the accompanying precautionary measures on the level of stocks and the consumption pattern.

Therefore, the increase in the annual general inflation rate in July and August 2021 is mainly due to the increase in the annual contribution of materials. prime food. The Central Bank of Egypt said the annual inflation rate of commodities prime food increased for the fourth consecutive month to 6.6% in August 2021 from 4.8% in July 2021.

He explained that this was partially limited by the decline in annual non-food inflation to 5.3% in August 2021, from 5.7% in July 2021, which is the lowest rate recorded since April 2014.

He pointed out that initial data indicates that the real GDP growth rate registered a level of 7.7% in the second quarter of 2021, to reflect the continued recovery in economic activity, continuing its upward trend from the lowest rate. recorded in the same period last year, with a contraction of 1.7%. He specified that the recovery is due to the positive impact of the base year compared to the contraction of the previous year.

The bank confirmed that the growth rate recorded 3.3% during the fiscal year 2020/2021, which is higher than previous estimates of 2.8% for the same fiscal year and compared to 3.6% during the year. last fiscal year.

He added: “Furthermore, preliminary indicators point to a strong and continuous improvement in most economic sectors. On the other hand, the unemployment rate stabilized at 7.3% in the second quarter of 2021, compared to 7.4. % in the first quarter of 2021. “

He states that, in the light of the above, the Monetary Policy Committee has decided that the base interest rates at the Central Bank are currently adequate and consistent with the achievement of the target inflation rate of 7% (± 2 percentage points) in media in the fourth quarter of 2022 and price stability in the medium range.

He stressed that the Monetary Policy Committee will closely monitor all economic developments and risk balances and will not hesitate to use all its tools to support the recovery of economic activity, provided that inflationary pressures are contained.

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