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    MPC Press Release 2 Feb 2023

    Uploaded by

    yaoshuai2009511

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 2

    Press Release – February 2nd, 2023

    MPC decided to keep key policy rates unchanged

    In its meeting today, the Monetary Policy Committee (MPC) decided to keep the Central
    Bank of Egypt’s (CBE) overnight deposit rate, overnight lending rate, and the rate of the
    main operation unchanged at 16.25 percent, 17.25 percent, and 16.75 percent, respectively.
    The discount rate was also kept unchanged at 16.75 percent.

    On the global front, forecasts for international commodity prices have marginally tightened
    compared to those underlying the previous MPC meeting. On the other hand, financial conditions
    continued to ease for the US economy while the euro area’s financial conditions broadly stabilized,
    compared to available information at the time of the previous MPC meeting. Nonetheless, the
    outlook for international commodity prices remains uncertain, as several factors contribute to
    upside and downside pressures. Notable factors include the expected global economic slowdown,
    the loosening of COVID-19 restrictions in China, and the Russia-Ukraine conflict.

    Domestically, economic activity has picked up slightly in 2022 Q3, registering 4.4 percent
    compared to 3.3 percent in 2022 Q2. Real GDP growth was primarily driven by the improvement
    in tourism, agriculture and trade. Additionally, most leading indicators continued to register
    positive growth rates in 2022 Q4, albeit at a slower pace. Going forward, real GDP growth is
    expected to moderate in the fiscal year 2022/23 compared to the previous fiscal year, before
    picking up thereafter. Meanwhile, the unemployment rate recorded 7.4 percent in 2022 Q3, slightly
    up from the 7.2 percent recorded in the previous quarter.

    Annual urban headline inflation continued to increase recording 21.3 percent in December 2022.
    Similarly, annual core inflation has been following an upward trend registering 24.4 percent in the
    same month. Accordingly, the average annual headline inflation recorded 18.7 percent during 2022
    Q4 compared to the preannounced target of 7 percent (±2 percentage points). Such developments
    reflect the impact of the Russia-Ukraine conflict and supply bottlenecks globally on the elevated
    levels of international commodity prices, despite having eased recently, the exchange rate
    fluctuations since March 2022 as well as other demand side pressures.

    The MPC judges that demand side pressures on inflation continue to be present, as evidenced by
    developments in real economic activity relative to potential capacity and the impact of recent
    exchange rate fluctuations, both of which are consistent with higher broad money growth outturns.
    To counter these inflationary pressures, the MPC delivered front loaded policy rate hikes of 800
    bps in the previous year, of which 500 bps were in 2022 Q4 alone. In addition, the MPC decided
    to increase the required reserve ratio by 400 bps in September 2022. The pre-emptive tightening
    policy response aims to anchor inflation expectations at the upcoming inflation target of 7 percent
    (± 2 percentage points) on average by 2024 Q4.

    As the future path of inflation is a function of the cumulative tightening in the monetary policy
    stance to date and the lag with which monetary policy tools operate, the MPC decided to maintain
    key policy rates unchanged in today’s meeting in order to assess the impact of the implemented
    front-loaded tightening policies in a data-driven manner. The MPC reiterates that the path of future
    policy rates remains a function of forecasted inflation rather than prevailing inflation rates and
    notes that maintaining tight monetary conditions proves to be a necessary condition to achieve the
    CBE’s upcoming inflation targets and price stability over the medium term.

    Monetary Policy Sector


    [email protected]

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