Egypt hiked overnight interest rates by a more-than-expected 300 basis points (bps) on Thursday, the most since 2016, as part of the authorities’ broader strategies to contain high inflation.
Central Bank of Egypt (CBE) said in a statement that the Monetary Policy Committee (MPC) raised the deposit rate to 16.25% and the lending rate to 17.25%. The discount rate was also raised by 300 basis points to 16.75%.
“The objective of raising policy rates is to anchor inflation expectations and contain demand-side pressures, higher broad money growth and second-round effects of supply shocks,” the MPC said in a statement added.
CBE most recently raised rates by 200 bps at a surprise meeting in October. The same day, the central bank devalued its currency by 14.5% and announced that the North African country had secured a $3 billion financial support package from the International Monetary Fund (IMF).
The IMF deal is expected to unlock a deal that’s expected to unlock additional financing of about $14 billion from international and regional partners as the Middle East nation seeks to restore confidence in local assets.
Egypt’s annual urban consumer inflation accelerated to a five-year high of 18.7% in November from 16.2% in October while core inflation quickened to 21.5% from 19.0% in October. The central bank projected a new inflation target of an average of 7%, plus or minus 2 percentage points by the fourth quarter of 2024.
