The CBE has now increased key interest rates by 5% since the start of the Russia/Ukraine conflict
In an unscheduled meeting, the Central Bank of Egypt’s Monetary Policy Committee (MPC) has raised key interest rates by 2% (200 bps), citing rising global and domestic prices.
The overnight deposit rate, overnight lending rate, and the rate of the main operation were upped to 13.25%, 14.25%, and 13.75%, respectively. The discount rate was also raised to 13.75%.
The CBE has now increased key interest rates by 5% since the start of the Russia/Ukraine conflict.
Since the news broke, the exchange rate has skyrocketed to EGP 22.55 against the USD, up from yesterday’s EGP 19.17, according to Bloomberg at 11:00 am Cairo time.
The central bank attributed its decision to rising prices that are expected to keep Egypt’s headline inflation rate above the CBE’s target of 7% (±2 percent) on average.
“The global economy faced multiple shocks and challenges, the likes of which have not been seen in years. Recently, global markets have been subject to the COVID-19 pandemic that put the world on lockdown, followed by the Russian-Ukraine conflict, which had dire economic ramifications. Consequently, Egypt weathered large capital outflows and rising commodity prices,” the CBE said.
The raising of the key interest rates is aligned with the CBE’s mandate of maintaining price stability within the local market over the medium term, the CBE explained in an official statement. The central bank has stated that it aims to stabilize inflation, as well as contain demand-side pressures and higher broad money growth.
“This will serve as a catalyst for the rejuvenation of economic activity in the medium term. Additionally, the CBE will work towards building the foundation for a derivatives market to further deepen the foreign exchange market and enhance its liquidity,” the CBE explained.
