CBE raises key interest rates for the first time in five years by 1%
The Central Bank of Egypt (CBE) said in a statement on Monday that it raised key interest rates by 100 basis points at an extraordinary meeting of the Monetary Policy Committee.
The central bank set the overnight lending rate at 10.25% and the overnight deposit rate at 9.25%, citing global inflationary pressures exacerbated by the war in Ukraine.
The Monetary Policy Committee of the Central Bank of Egypt added, “The rise in international commodity prices resulting from further disruptions in the supply chain in addition to the increased sense of risk aversion has increased domestic inflationary pressures as well as external imbalances.”
To maintain the macroeconomic stability that has been achieved, the Central Bank of Egypt stresses the importance of exchange rate flexibility as a shock absorber to maintain Egypt’s competitiveness.
The Monetary Policy Committee of the Central Bank of Egypt decided at its extraordinary meeting today to raise the overnight deposit and lending rates and the central bank’s main operation rate by 100 basis points to reach 9.25%, 10.25%, and 9.75%, respectively. The credit and discount rate was also raised by 100 basis points to 9.75%.
A combination of rising commodity and energy prices and a wave of global monetary tightening have added to pressure on the Egyptian economy, one of the most indebted countries in the Middle East.
Credit rating agency Fitch said last week that the Ukraine war would lead to “lower tourist inflows, higher food prices, and greater financing challenges.”
Urban inflation in Egypt reached 8.8% in February, the highest level since mid-2019, prompting expectations of a rate hike.
Just days ago, the average price of the dollar in Egypt, according to the data of the Central Bank of Egypt, recorded about 15.66 pounds for purchase, and 15.77 pounds for sale. In banks, the average price of the dollar was about 15.66 pounds for purchase and 15.76 pounds for sale.
The Central Bank said that on top of these pressures comes the noticeable rise in global commodity prices, supply chain disruptions, and rising shipping costs, in addition to the fluctuations in financial markets in emerging countries which led to domestic inflationary pressures and increased pressure on the external balance, according to the statement.