Egypt hikes interest rates by 1% to tackle rising inflation

Egypt’s central bank increased overnight interest rates by 100 basis points, or one percent, as part of its move to control inflation.

The overnight deposit and lending rates were raised to 19.25 percent and 20.25 percent respectively, the Central Bank of Egypt’s monetary policy committee (MPC) said in a statement.

Additionally, the discount rate was raised by one percent to 19.75 percent. 

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Annual urban headline inflation rose to a record 35.7 percent in June 2023 from 32.7 percent in May 2023. Similarly, annual core inflation increased to 41 percent in June 2023 from 40.3 percent in May 2023.

Headline inflation hit 32.952 percent in July 2017, eight months after Cairo devalued its currency by half as part of the reform programme agreed under the $12 billion International Monetary Fund support package.

“The MPC judges that inflation rates are likely to peak in the second half of 2023 before beginning a disinflation path towards the central bank’s pre-announced targets afterwards, supported by the cumulative monetary policy tightening to date,” the statement noted.

The committee will not hesitate to employ all its available tools to attain the CBE’s upcoming inflation targets of seven percent on average by Q4 2024 and five percent on average by Q4 2026, it added. 

The MPC restated future policy rates will be decided based on forecasted inflation rather than prevailing inflation rates as it continues to monitor developments underlying the economic outlook.

Annual urban inflation rose to a record high of 35.7 percent in June from 32.7 percent in May.