Economist: 3 reasons why the central bank keeps interest rates

Dr. Bilal Shuaib, the economist, confirmed that the decision of the Central Bank’s Monetary Policy Committee to maintain interest rates on the pound is an appropriate decision given the current market conditions.

“Shoaib” explained, during a phone call to the “Nile News” satellite channel, that there are 3 reasons behind maintaining the interest rates on the pound, the first of which is the study of the reflection of the impact of the exceptional big reduction in mid-March within the precautionary and proactive measures package to confront the economic repercussions of the global corona crisis, and the price represents The current discount is the lowest discount rate since the float on 11/2016.

The economist added that the second reason is that the market liquidity rates are good. Especially as there is a set of procedures that can be followed without resorting to the interest rate, including reducing the proportion of the mandatory reserve, and it is worth noting that the indicators of excess liquidity with the banking system are within safe limits.

He explained that the volume of domestic liquidity increased to reach about 3.884 trillion pounds at the end of July 2019, and the volume of local liquidity increased to 4.187 trillion pounds at the end of February 2020.

He pointed out that the third reason is that it is difficult to predict inflation rates in the short term, because most of the current expenditures are directed to the basket of food commodities; Consequently, the present exceptional circumstance is coupled with exceptional and unmeasurable behavior The savings certificates with a return of 15% helped to withdraw a lot of liquidity and thus maintain the relative stability of the inflation index despite the current crisis of the Corona Virus emerging, and it is worth noting the trend of the inflation index to the gradual decline.

He pointed out that the annual rate of urban inflation at the end of 2019 was 9.2% compared to 29.4% in 2017, a decrease of 20.3%, while the general figure for consumer prices decreased during April 2020 to reach 5.9%, a decrease of 25.8% compared to March 2016.

It is worth noting that the Monetary Policy Committee of the Central Bank of Egypt decided in its meeting today, Thursday, to keep the rates of return on deposit and lending for one night and the price of the main process at the level of 9.25%, 10.25% and 9.75%, respectively, as well as to keep the credit and discount rate at the level of 9.75% .

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