The Central Bank of Egypt said in a statement that it raised key interest rates by 200 basis points at the Monetary Policy Committee’s meeting yesterday, Thursday, in an effort to contain inflation after prices jumped at the highest pace in 3 years.

  • The committee raised the overnight lending rate to 12.25% from 10.25%.

  • The overnight deposit rate was increased to 11.25% from 9.25%.

  • The committee raised the credit and discount rate by 200 basis points to 11.75%.

The statement said that prices rose due, among other things, to the devaluation of the currency, and after the Ukrainian crisis led to a rise in wheat prices.

"The Monetary Policy Committee decided to raise interest rates... This is a necessary measure to control inflationary pressures and is consistent with achieving the medium-term price stability objective," he added.

The committee expected that inflation rates would exceed the rate targeted by the bank between 5% and 9% on average during the fourth quarter of 2022 “temporarily”, and that it would gradually decline again.

It indicated that annual consumer price inflation in cities accelerated more than expected in April to 13.1 percent from 10.5 percent, its highest level since May 2019.

The bank raised interest rates by 100 basis points in a surprise meeting on March 21, and attributed this to global inflationary pressures exacerbated by the war in Ukraine, after keeping them unchanged for nearly 18 months.

On the same day, the exchange rate of the pound against the dollar fell by 14%, and government banks have since started selling one-year saving certificates to citizens with a return of 18%.

Inflation continues to rise

Following the Central Bank’s decision today, Friday, the Middle East News Agency quoted the Chairman of the Board of Directors of Banque Misr, Mohamed El-Etreby, as saying that the issuance of certificates, which he said had raised 216 billion pounds so far, is “continuing without modification” despite the Central Bank raising the interest rate.

“It appears that the primary objective right now is to curb inflation, which is very much in line with central banks elsewhere,” said Allen Sandeep, head of research at Naeem Holdings.

Today's statement said that global financial conditions are constraining as central banks tighten monetary policies.

The committee said, "Achieving low and stable inflation rates in the medium term is a prerequisite for supporting the purchasing power of the Egyptian citizen and achieving high and sustainable growth rates."