The CBE said that the decision is necessary to stabilize inflation expectations and set the policy rate at suitably restrictive levels
The Central Bank of Egypt’s (CBE) Monetary Policy Committee (MPC) has pushed up the interest rates by 200 basis points (bps) at its first meeting in 2024, according to a press release on February 1st.
The CBE said that the decision is necessary to stabilize inflation expectations and set the policy rate at suitably restrictive levels.
Accordingly, the overnight deposit rate and the overnight lending rate rose to 21.25% and 22.25%, respectively.
Also, the rate of the main operation increased to 21.75% and the discount rate went up to 21.75%.
Given the ongoing impact of major central banks’ policy rate hikes on demand, the pace of world economic growth has continued to decline, the CBE said.
Furthermore, the ongoing effects of tighter monetary policy cycles in developed and developing market economies have reduced global inflationary pressures, and inflation projections in these areas have decreased since the last meeting.
“However, increasing geopolitical tensions and ongoing trade disruptions in the Red Sea have raised uncertainty surrounding the inflation outlook, particularly concerning supply-chain shocks and their impact on key commodity prices,” the press release highlighted.
Due to the prolonged regional instability and maritime trade disruptions to in the Red Sea impacting the services sector, the real gross domestic product (GDP) growth is thus predicted to soften during the current fiscal year (FY) 2023/2024 before progressively rising thereafter, the CBE added.
Pricing and consumption patterns are still being impacted by the persistently high levels of widespread inflationary pressures, the CBE noted, adding that the continuous interruptions to maritime trade and geopolitical unpredictability are driving up inflationary pressures both domestically and internationally.
The CBE asserted that MPC stands ready to employ all accessible tools to uphold a sufficiently restrictive policy stance, preserving the declining trend in underlying inflation.
In 2023, the CBE raised interest rates by a total of 300 basis points (bps), of which 200 bps in March and 100 bps in August.
It is worth mentioning that Egypt’s annual headline dropped to 35.2% in December, compared to 36.4% in November.
Source : Zawya
