Egypt’s central bank, citing inflation, raises interest rates by 200 basis points

The headquarters of the Central Bank of Egypt is seen in downtown Cairo, Egypt, March 22, 2022. REUTERS/Mohamed Abd El Ghany

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CAIRO, May 19 (Reuters) – The Central Bank of Egypt (CBE) raised overnight interest rates by 200 basis points on Thursday, seeking to contain inflation expectations after prices soared at their highest level in three years.

The bank’s Monetary Policy Committee (MPC) raised the deposit rate to 11.25% from 9.25% and the lending rate to 12.25% from 10.25%, it said in a statement. a press release accompanying the decision.

He cited an increase in annual urban inflation to 13.1% in April from 10.5% in March, its highest level since May 2019.

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Prices were pushed higher in part by currency depreciation and rising wheat prices after the Ukraine crisis, the statement added.

“The MPC decided that it was necessary to raise policy rates to contain inflationary pressures, which is consistent with achieving price stability over the medium term,” he said.

“The high annual headline inflation rate will be temporarily tolerated against the CBE’s pre-announced target” of between 5% and 9% before falling after the fourth quarter, he said.

Eighteen analysts polled by Reuters expected the bank to raise the median deposit rate to 11.00% and its lending rate to 12.25%.

In a surprise meeting on March 21, the bank raised rates by 100 basis points, citing global inflationary pressures, after keeping them unchanged for nearly 18 months.

“Keeping inflation in check seems to be the main focus now, quite aligned with central banks elsewhere,” said Allen Sandeep of Naeem Research. “High inflation appears to be here to stay for the short term.”

Thursday’s statement said global financial conditions also tightened as major central banks tightened policy rates.

“Achieving low and stable inflation over the medium term is a prerequisite for achieving high and sustainable growth rates,” the MPC said.

The MPC also raised its discount and lending rates by 200 basis points to 11.75%.

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Reporting by Mahmoud Mourad, Yasmin Hussein and Lilian Wagdy; Written by Mahmoud Mourad and Patrick Werr; Editing by Angus MacSwan

Our standards: The Thomson Reuters Trust Principles.

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