The Central Bank of Egypt (CBE) decided to cut interest rates by 1.5% on Thursday.
CBE slashed overnight deposit rate, lending rate, and the rate of main operation to 14.25%, 15.25%, and 14.75%, respectively.
According to the press statement issued by CBE’s Monetary Policy Committee, the cuts comes as Egypt’s annual headline and core inflation continued to decline to record 8.7% and 5.9% in July 2019, respectively, the lowest rates in almost four years, notwithstanding the recently
implemented fiscal consolidation measures that reached cost recovery for most fuel products.
Furthermore, the statement indicated that this decline was supported by the containment of inflationary pressures, as evident in the
relatively tame monthly inflation figures, and by favorable base effects, as the recently implemented measures were weaker compared to the previous year.
On the other hand, real GDP growth continued to increase slightly to record a preliminary estimate of 5.7:% in 2019 Q2 and 5.6% in fiscal year 2018/19, the highest in eleven years.
Meanwhile, the unemployment rate continued to decline to record 7.5% in 2019 Q2, thereby narrowing by almost 6 percentage points from its peak in 2013 Q4.
The statement cited that the global expansion of economic activity continued to weaken, financial conditions eased, and trade tensions continued to weigh on the outlook. International oil prices recently declined.
However, CBE believes that they yet remain subject to volatility due to geopolitical risks and potential supply-side factors.