The Central Bank of Egypt’s Monetary Policy Committee (MPC) decided to keep key interest rates. This marks the second time that the committee has maintained interest rates after a series of hikes, pushing key rates up by 3%, since the start of 2023.

The MPC left the overnight deposit rate at 19.25%, the overnight lending rate at 20.25%, the main operation rate at 19.75%, and the discount rate at 19.75%.

Egypt’s real GDP growth for Q1 of 2023 remained steady at 3.9%, compared to the previous quarter, explained the MPC’s release on Thursday. This was primarily driven by positive contributions from consumption and net exports, with the latter powering real growth since Q1 2022, in line with exchange rate developments.

The MPC expects a slowed real GDP growth for FY2022/2023, compared to the previous fiscal year, which saw growth at 6.7%.

“Leading indicators for Q3 2023 suggest a general stability in economic activity compared to Q2 2023. Meanwhile, the unemployment rate slightly declined to 7.0% in Q2 2023 compared to 7.1% in the previous quarter, mainly due to an increase in employment, absorbing new entrants into the labor market,” the statement wrote.

Annual urban headline inflation maintained its upward climb, reaching 38.0% in September 2023, driven by higher food inflation while non-food inflation saw a decrease.

The MPC explained that, for the third consecutive month, rising food inflation was accelerated by elevated prices of volatile food items, as opposed to core food items in previous months. This was attributed to difficult weather conditions, leading to stronger increases in the prices of seasonal agricultural products.

Annual core inflation declined for the third consecutive month, registering 39.7% in September 2023, down from 40.4% in August 2023.

Internationally, the MPC noted that projections for key international commodity prices, particularly energy, have been revised upwards since its last meeting, primarily due to rising geopolitical tensions in the region.

Despite this, it highlighted that inflationary pressure relaxed worldwide due to monetary policy tightening cycles in major economies and favorable base effects. This will lead to forecasts of headline inflation in certain global economies to be lower, but are “still expected to remain above their respective target levels”.