The Central Bank of Egypt (CBE) has hiked overnight deposit rate, the overnight lending rate, and the rate of the main operation by 600 basis points to 27.25 percent, 28.25 percent, and 27.75 percent, respectively.
TheNewsGuru.com (TNG) reports CBE on Wednesday also hiked Egypt’s discount rate by 600 basis points to 27.75 percent while acknowledging that the tighter stance could result in a short-term contraction in the private sector’s real credit growth.
The apex bank, however, noted that the persistence of excessive inflationary pressures poses greater risks to its stability.
TNG reports Egypt’s pound fell sharply against the dollar as the markets opened, tumbling past 40 pounds to the dollar from about 30.85 pounds previously.
While the central bank has had an inflation target until now, it also sought to manage the pound, which has been fixed at 30.85 to the dollar over the past year as the central bank has sought to defend its value amid a chronic shortage of foreign currency.
According to CBE, the measures were taken in the light of inflationary pressures driving headline inflation to record levels in the country.
It further stated that the measures have been adopted as part of a set of comprehensive economic reforms in coordination with the government, and backed by the steadfast support of multilateral and bilateral partners.
“The domestic economy has been recently weighed down by foreign exchange shortages resulting in the existence of a parallel exchange rate market and constraining economic growth.
“Coinciding with this, external spillovers emanating from global inflationary pressures have continued to accumulate as the world economy witnesses successive shocks. Such shocks elevated risk-off sentiment and inflation expectations, amplifying underlying inflation.
“The resulting exchange rate movements and significant passthrough of international commodity prices, coupled with domestic supply shocks, have resulted in persistent inflationary pressures driving headline inflation to record levels.
“Accordingly, while annual inflation figures have been recently declining, they are expected to remain substantially above the Central Bank of Egypt’s inflation target of 7 percent (±2 percentage points) on average in 2024 Q4,” a statement released by CBE shortly after an emergency Monetary Policy Committee (MPC) meeting reads.