Cairo – Mubasher: The Central Bank of Egypt’s (CBE) Monetary Policy Committee (MPC) decided in a special meeting to raise the interest rates by 600 basis points (bps), or 6%.
The overnight deposit rate, the overnight lending rate, and the rate of the main operation were increased to 27.25%, 28.25%, and 27.75%, respectively, according to a press release.
The discount rate was also raised by 600 bps to 27.75%.
The central bank said that Egypt's economy has been weighed down by foreign currency shortages and a parallel exchange rate market, slowing growth, while global inflation and successive supply shocks have amplified domestic price pressures, keeping headline inflation above 7%.
The CBE noted that the additional 600 bps rate hike aims to anchor expectations and lift real rates into positive territory.
“The elimination of the parallel foreign exchange market is expected to dampen inflation expectations, rein in underlying inflation and accordingly, headline inflation is projected to follow a steadily decelerating path over the medium term,” the central bank said.
“Nevertheless, upside risks to the predicted inflation path include regional geopolitical tensions, expected volatility in international commodity markets and the state of global financial conditions. In light of these risks and changes in macroeconomic dynamics, the reassessment of the CBE's inflation targets will be communicated,” the CBE added.
Furthermore, the CBE stated that the MPC will assess risks and strengthen credibility by maintaining restrictive policy as needed.
