Egypt’s monetary policy should continue to aim to sustain inflation in line with the Central Bank of Egypt’s (CBE) medium-term inflation objectives, mission chief for Egypt at the International Monetary Fund (IMF) Subir Lall, told Daily News Egypt, answering an online question on the recent decision of the CBE to cut the interest rates.
The CBE’s decision to reduce interest rates by 150 basis points reflects favourable inflationary trends in recent months, Lall commented.
The policy stance should continue to be adjusted as needed based on the CBE’s assessment of expected inflation, Lall added.
Inflation continued to decline in July 2019 with headline inflation falling to 8.7% compared to 14% in May and core inflation to 5.9% in July compared to 7.8% in May of the same year, Lall noted.
The CBE decided to cut interest rates by 1.5% on 22 August 2019, slashing overnight deposit rate, lending rate, and the rate of main operation to 14.25%, 15.25%, and 14.75%, respectively.
The CBE’s Monetary Policy Committee mentioned in August 2019 that the interest rates cut 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.