Egypt’s central bank has convened a surprise monetary policy meeting this morning to hike interest rates by 1 percent.
The central bank’s Monetary Policy Committee (MPC) has raised the overnight deposit rate, overnight lending rate, and the rate of the main operation to 9.25 percent, 10.25 percent, and 9.75 percent, respectively, the bank said in a statement.
The discount rate was also increased by 100 points to 9.75 percent.
Despite Egypt’s reform programme placing the economy on a strong footing to weather economic disruptions and the hard–won macroeconomic gains, the central bank said the “global inflationary pressures began to build after the world economy emerged from the disruptions caused by the COVID–19 pandemic.”
“These pressures became amplified with the recent Russia–Ukraine conflict. Rising international commodity prices resulting from further supply chain disruptions in addition to increased risk–off sentiment have added to domestic inflationary pressures as well as external imbalances. Being keen on safeguarding the achieved macroeconomic stability, the CBE stresses on the importance of the exchange rate flexibility to act as a shock absorber to preserve Egypt’s competitiveness.” the CBE statement added.
“In light of the above developments and given the CBE’s monetary policy horizon of its inflation target of 7 percent (±2 percentage points) on average in 2022 Q4, the MPC decided to raise policy rates by 100 basis points to reign in inflationary pressures while supporting economic activity. The MPC reiterates that the objective of raising policy rates is to anchor inflation expectations and contain second round effects of supply shocks stemming from exogenous factors outside the scope of monetary policy. Achieving low and stable inflation over the medium term supports real incomes and sustains the achieved competitiveness gains of the Egyptian economy.”