The Central Bank of Egypt (CBE) kept its interest rates unchanged on Thursday, saying the ongoing war in Ukraine is among the main external shocks to prices a month after the top lender delivered its biggest hike in nearly half a decade.
“The MPC treats the developments stemming from the Russo-Ukrainian conflict to be among the exogenous shocks that are outside the scope of monetary policy,” CBE said in a statement.
The central bank’s Monetary Policy Committee (MPC) held its lending rate steady at 12.25%, deposit rate at 11.25%, and main operation rate at 11.75%, saying that it continues to monitor the effects of the previous interest rate hike on inflation as it aims to achieve price stability.
The apex bank said the elevated pace of price increases “will be temporarily tolerated” relative to its target of 7%, plus or minus two percentage points, on average in the fourth quarter.
The Egyptian government has been ramping up efforts to fight inflation, including the central bank’s decisions to raise its key interest rate and devalue the local currency in March. However, the move is adding to the pressure as the increase in food and fuel prices has already sent inflation soaring to its highest level in three years.
CBE said that although domestic economic activity continued to expand at a slower pace in the first quarter, indicators for the second quarter of the year “point towards normalized economic activity, as the strong positive base effect diminishes.”
The Arab world’s most populous nation has received help from its oil-rich GCC allies who’ve pledged more than $22 billion in deposits and investments in recent months. On Tuesday, Egypt and Saudi Arabia signed 14 investment deals worth $7.7 billion. Abu Dhabi wealth fund ADQ acquired stakes in five publicly-traded Egyptian companies for $1.8 billion and Qatar pledged $5 billion worth of investment.
The Emir of Qatar Sheikh Tamim bin Hamad al-Thani is expected to visit Egypt Friday after he last visited the country in 2015.
