The Central Bank of Egypt’s Monetary Policy Committee decided on Thursday to keep the overnight deposit rate, overnight lending rate, and the rate of the main operation unchanged at 9.25 percent, 10.25 percent, and 9.75 percent respectively.

The discount rate was also kept unchanged at 9.75 percent.

In a statement, the central bank said that the decision was driven by the annual headline urban inflation rate, which declined from 5.6 percent in June to 4.2 percent in July, the lowest rate recorded since November 2019.

The decline was due to continued muted inflationary pressures and supported by favourable base effects, the central bank said in a statement.

Monthly headline urban inflation recorded 0.4 percent last month compared to 1.8 percent in July 2019, which showed the impact of the implemented fiscal consolidation measures to reach cost recovery for fuel products in 2019, the central bank said.

It added that the July 2020 monthly headline urban inflation continued to reflect higher non-food prices and lower food prices for the third consecutive month. In the meantime, annual core inflation declined from 1.0 percent in June 2020 to 0.7 percent in July, the lowest rate on record.

Preliminary data show that real GDP growth for the 2019/2020 fiscal year was 3.8 percent, compared to 5.6 percent in the first half of the fiscal year.

This reflects the impact of the COVID-19 outbreak and the accompanying containment measures, according to the CBE.

On the other hand, the contribution of the public sector to growth increased in the first quarter of 2020, particularly in the petroleum manufacturing sector, which supported economic activity during this period, while a number of leading indicators started showing signs of recovery in June and July of this year, in tandem with the easing of the containment measures.

Additionally, the unemployment rate increased to 9.2 percent in April 2020, up from 7.7 and 8 percent in the first quarter of 2020 and the fourth quarter of 2019, respectively, according to the central bank.

Globally, the CBE said that economic activity remained weak despite some recovery associated with an ease in COVID-19 related lockdown measures, which partly supported the recent increase in international oil prices.

Meanwhile, global financial conditions continued to improve, supported mainly by policy measures despite the ongoing uncertainty, the bank said. Annual headline inflation rate is expected to remain below the inflation target’s mid-point of 9.0 percent on average during the fourth quarter of 2020.

“Yet with the ongoing high level of global uncertainty, and given the preemptive measures taken by the Central Bank of Egypt, including the reduction of 300 basis points during the unscheduled MPC meeting on March 16, 2020, the MPC decided to keep key policy rates unchanged,” read the statement.

“The MPC closely monitors all economic developments and will not hesitate to utilize all available tools to support the recovery of economic activity, within its price stability mandate,” it added.