CBE hikes key policy rates by 200 bps to cool down inflation
Updated 3/30/2023 7:00:00 PM
Arab Finance: The Central Bank of Egypt’s (CBE) Monetary Policy Committee (MPC) has raised interest rates by 200 basis points (bps), marking the first-rate hike in 2023, the central bank announced in a press release on March 30th.
The MPC raised the overnight deposit rate, the overnight lending rate, and the main operation rate to 18.25%, 19.25%, and 18.75%, respectively.
This decision was made to assess the impact of the adopted front-loaded tightening policies in a data-driven manner.
The MPC stresses the need to restrict monetary policy as a prerequisite for achieving the inflation rates targeted by the CBE of 7% (± 2% points) on average during the fourth quarter (Q4) of 2024 and 5% (± 2% points) on average during Q4 2026.
The central bank said that it will continue to monitor closely indications of persistent inflationary pressures to adjust its policy to achieve the goal of price stability.
“On the global front, forecasts for international commodity prices have eased compared to those underlying the previous MPC meeting, but their outlook remains uncertain. Notable factors include the outlook for global supply bottlenecks and global economic activity, especially in light of the reopening in China coupled with the recent financial sector issues in advanced economies,” the press release reads.
“The latter factor has contributed to large volatility in financial conditions indices in key markets such as the US and EU, which confirms an increased level of uncertainty regarding the global economic outlook,” the CBE added.
On February 2nd, the CBE kept interest rates on hold at its first meeting in 2023.
It is worth mentioning that Egypt’s annual headline inflation rate rose to 32.9% in February, compared to 10% in the same month of 2022.
In 2022, the CBE hiked rates by 800 basis points (bps), of which 500 bps were in Q4 to tame the accelerating inflation.
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