The Central Bank of Egypt reduced the required reserve ratio (RRR) by 200 basis points to 12.00% from 14.00% previously. The Bank said: "In light of the current liquidity situation which has emerged on the back of domestic and global developments, the CBE's Board decided to reduce the RRR from 14 percent to 12 percent. This measure will provide permanent liquidity into the banking system and help ease credit conditions in the market"
Previously the Bank maintained its interest rates unchanged when it announced policy settings in February this year. Egypt reported annual consumer price inflation of 9.55% in December, up from 8.21% in September, 8.49% in August, 10.4% in July, compared to 11.8% in June, 11.9% in May, and down from 12.1% in April. The toll of the revolution was seen as Egypt's gross national product contracted by 4.2% year-on-year in the third quarter of the 2011/2012 fiscal year and investment fell 26% due to uncertainty arising from the political upheaval.
Real GDP expanded by 0.3% in Q1 2011/2012 (0.4% in Q4 2010/2011), full year GDP growth was 1.8% in 2010/2011 vs 5.1% in the 2009/2010 year. The Egyptian pound (EGP) has weakened about 2% against the US dollar over the past year, while the USDEGP exchange rate last traded around 6.04
The old RRR is becoming a handy policy tool, especially in developing markets...
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