As the Monetary Policy Committee of the Central Bank of Egypt holds a meeting tonight, Thursday, to determine the fate of interest rates, all indications suggest that they will remain unchanged for the seventh consecutive time. Analysts and research firms believe there are several compelling reasons for the Central Bank of Egypt to firmly keep interest rates steady, chief among them being the stability of inflation rates at the targets set by the Egyptian government and the central bank.
According to recent data from the Central Agency for Public Mobilization and Statistics in Egypt, annual inflation surged to 5.7% in August, with monthly inflation rising by 0.1% compared to a 0.9% monthly increase in July. Global stability regarding inflation and interest rates may also influence the Central Bank of Egypt to maintain the current interest rates.
Various pricing indicators have recently shown an increase in global inflation, with inflation in the Eurozone reaching its highest level in 10 years, recorded at 3%. Additionally, the Food and Agriculture Organization's food price index has risen again in August, alongside an increase in the prices of wheat and oils, both of which Egypt relies on imports for.
The increase in global inflationary pressures is expected to impact local prices, especially if the Egyptian government decides to review prices for certain food items. Although inflation expectations remain close to the central bank's target, the risks of rising commodity prices, global supply chain disruptions, and high shipping costs will likely emerge in the coming months, suggesting a potential rise in inflation rates.
In light of these increasing inflationary pressures, the Central Bank of Egypt will prioritize maintaining inflation expectations, which supports the move to keep interest rates stable rather than adjusting them. In November, the Monetary Policy Committee of the Central Bank of Egypt decided to cut both the overnight deposit and lending rates, as well as the central bank's main operation rate by 50 basis points, bringing them to 8.25%, 9.25%, and 8.75%, respectively. However, in the August meeting, the committee decided to keep the overnight deposit and lending rates and the main operation rate steady at 8.25% and 9.25%, respectively, marking the sixth consecutive time. The credit and discount rate remains at 8.75%.
