Friday, October 14, 2011

Central Bank of Egypt Keeps Monetary Policy Unchanged

The Central Bank of Egypt held its overnight deposit rate unchanged at 8.25%, the overnight lending rate at 9.75%.  The Bank said: "the slowdown in economic growth should limit upside risks to the inflation outlook. Given the balance of risks on the inflation and GDP outlooks and the increased uncertainty at this juncture, the MPC judges that the current key CBE rates are appropriate."  On the inflation outlook the bank noted: "The probability of a rebound in international food prices is less likely now in light of recent global developments, nonetheless supply shortages in certain food commodities on the back of bad harvests could pose an upside risk to the inflation outlook."

Previously the Bank also maintained its interest rates unchanged when it announced policy settings in August this year.  Egypt reported annual consumer price inflation of 8.21% in September, 8.49% in August, 10.4% in July, compared to 11.8% in June, 11.9% in May, and down from 12.1% in April.  The toll of the revolution was seen as Egypt's gross national product contracted by 4.2% year-on-year in the third quarter of the 2011/2012 fiscal year and investment fell 26% due to uncertainty arising from the political upheaval.

Real GDP expanded by 0.4% in Q4 2010/2011, bringing full year GDP growth to 1.8% vs 5.1% in the 2009/2010 year.  The Egyptian pound (EGP) has weakened about 3% against the US dollar so far this year, while the USDEGP exchange rate last traded around 5.97


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