CBE hikes interest rates by 600 bps in special MPC meeting

Updated 3/6/2024 9:46:00 AM

Arab Finance: The Central Bank of Egypt’s (CBE) Monetary Policy Committee (MPC) has increased the interest rates by 600 basis points (bps) at its special meeting on March 6th, as per a statement.

The CBE said that the move is to stabilize the local economy and to curb the escalating inflationary pressures and foreign exchange shortages.

Accordingly, the overnight deposit rate and the overnight lending rate rose to 27.25% and 28.25%, respectively.

Also, the rate of the main operation increased to 27.75% and the discount rate went up to 27.75%.

The CBE has reaffirmed its commitment to maintaining price stability and sustainable economic development. Transitioning to a flexible inflation targeting regime, the CBE will allow the exchange rate to be determined by market forces, facilitating the elimination of foreign exchange backlogs.

While acknowledging potential short-term impacts on private sector credit growth, the CBE prioritizes price stability to foster sustainable economic expansion. These measures, part of comprehensive economic reforms, are supported by multilateral and bilateral partners, ensuring adequate foreign exchange liquidity and debt sustainability, the CBE said.

The elimination of the parallel market is expected to mitigate the negative repercussions of soaring inflation, leading to a gradual decline in headline inflation. However, regional tensions and global market volatility pose upside risks to the inflation outlook, requiring constant reassessment of policy targets.

The MPC asserts its commitment to maintaining a restrictive monetary stance until inflation is firmly anchored while monitoring economic indicators to ensure a balanced approach between price stability and economic growth.