Egypt unexpectedly hikes key interest rates by 200 basis points

Egypt’s central bank has raised on Sunday its key interest rates by 200 basis points during a meeting of its Monetary Policy Committee (MPC).

The central bank raised the overnight deposit rate to 16.75 percent from 14.75 percent and the overnight lending rate to 17.75 from 15.75 percent.

This is the first increase in rates since the central bank aggressively hiked them by 300 points in early November after floating the Egyptian pound. The central bank has kept its key interest rates unchanged for four consecutive meetings since November’s massive hike.

The MPC meeting was made three days later than scheduled fuelling speculations that the central bank might consider a recommendation by one of top International Monetary Fund’s officials to raise interest rates again after inflation accelerated to more than 30 percent.

Jihad Azour, IMF Middle East chief, emphasised earlier in April the need for policymakers to make tackling inflation a priority, citing interest rates as the “right instrument” to tame inflation. He later listed them as one option among a set of tools.

Egypt had been struggling with a shortage of foreign currency since an uprising in 2011 drove away tourists and foreign investors, both major sources of hard currency.

In November it sealed a $12 billion, three-year loan from the International Monetary Fund to support its economic reform programme.