Tue, 11 Aug 2020 - 03:16 GMT
Tue, 11 Aug 2020 - 03:16 GMT
CAIRO – 11 August 2020: By registering a 4.2 percent inflation rate in July, Egypt has become the world’s highest interest rates when adjusted for inflation, according to Bloomberg.
The American news agency stated that consumer prices in urban parts of Egypt grew at the slowest annual pace since November as the global pandemic weighed on demand and food costs declined.
The Central Agency for Public Mobilization and Statistics (CAPMAS) announced Monday that Egypt’s annual consumer price inflation recorded 4.6 percent in July 2020, compared to 7.8 percent in July 2020. The annual core inflation rate reached 0.7 percent in July, down from 1 percent in June, according to the central Bank of Egypt (CBE).
“Purchasing power continues to show signs of weakness, which started in 2019 and got worse with the repercussions of the pandemic on wages and employment,” head of research at Cairo-based Pharos Holding Radwa El-Swaify told Bloomberg. “A continued focus from the government on sustainable supply of fruits and vegetables to the market has kept food inflation in check.”
Bloomberg pointed that almost one-third of Egyptian households said their income was insufficient to meet their needs in May.
More than a quarter of employed Egyptians lost their jobs between the end of February and May, and about 90% of Egypt’s households switched to cheaper food to adjust to the new circumstances. The government earlier cut its economic growth projections for the fiscal year that started in July, but the depth of the slowdown depends on when the contagion will subside, according to the new agency.
As per interest rates, most economists surveyed by Bloomberg predict the central bank will leave its key deposit rate at 9.25 percent when its Monetary Policy Committee meets on Aug. 13.
It said that ddjusted for prices, Egypt’s policy rate is just over 5 percent, the highest among more than 50 major economies tracked by Bloomberg. The central bank reduced borrowing costs by a combined 450 basis points last year and another 300 basis points at a March 16 emergency meeting.
But the focus for policy makers will likely be on the uncertain global outlook and the need to keep Egyptian assets appealing for international investors after capital inflows resumed in June.
Even with inflation expected to stay around 5 percent-6 percent for the rest of 2020, the central bank probably won’t act any time soon, according to El-Swaify.
“The MPC will likely maintain rates until year-end to keep an attractive real rate at around 3%, especially since foreign investors started showing appetite for local debt instruments once more,” she said.
The Monetary Policy Committee of the Central Bank of Egypt (CBE) decided in June to keep the overnight deposit rate, the overnight lending rate, and the rate of the main operation at 9.25 percent, 10.25 percent, and 9.75 percent, respectively. Moreover, credit and discount rates are cut at 9.75 percent from 12.75 percent.
Earlier, CBE decided to cut the overnight deposit rate, the overnight lending rate, and the rate of the main operation in an emergency meeting by 300 basis points.