Egypt raised interest rates for the second time since March, seeking to tackle soaring inflation and restore the allure of its local debt with foreign investors amid a global wave of monetary tightening.
The central bank increased the deposit and lending rates by 200 basis points each to 11.25% and 12.25% respectively, the Monetary Policy Committee said Thursday in a statement.
The Central Bank of Egypt cited an increase in annual urban inflation to 13.1 per cent in April from 10.5 per cent in March, its highest since May 2019.
Prices were pushed up in part by currency depreciation and higher wheat prices after the Ukraine crisis, the statement added.
” The MPC decided that raising policy rates is necessary to contain inflationary pressures which are consistent with achieving price stability over the medium term. The elevated annual headline inflation rate will be temporarily tolerated relative to the CBE’s pre-announced target” of between 5% and 9% before declining after the fourth quarter.” the Central Bank of Egypt.
Eighteen analysts polled by Reuters had expected the bank to raise the median deposit rate to 11.00% and its lending rate to 12.25%.
At a surprise meeting on March 21, the bank raised rates by 100 bps, citing global inflationary pressures, after having kept them unchanged for nearly 18 months.
“Reining in inflation seems like the primary objective now, very much aligned with central banks elsewhere. Elevated inflation seems like it’s here to stay for the near term.” Allen Sandeep of Naeem Research
Thursday’s statement said global financial conditions had also tightened as major central banks tightened policy rates.
“Achieving low and stable inflation over the medium term is a prerequisite condition to achieve high and sustainable growth rates,” the MPC said.
The MPC also increased its discount and credit rates by 200 basis points to 11.75%.
Read also; Egypt in Talks with IMF for New Funding.
