The Central Bank of Egypt has decided to raise its key interest rates by 100 basis points, i.e., one percentage point, for the first time in nearly two and a half years. This decision comes amid rising inflationary risks, increased market uncertainty, and a depreciation of the Egyptian pound against the U.S. dollar.
The last hike in the Egyptian central bank’s policy rates occurred on Wednesday, March 6, 2024, at an extraordinary meeting of its Monetary Policy Committee.
The Committee explained that this decision aims to anchor inflation expectations and to preserve the downward trajectory of inflation, in an external economic environment that it regards as unfavorable.
The new interest rates in Egypt
Following this decision, the central bank’s key interest rates are now set as follows:
- Overnight deposit rate: 20 %.
- Overnight lending rate: 21 %.
- Central Bank main operation rate: 20.5 %.
- Discount and credit rate: 20.5 %.
This adjustment corresponds to an increase of one percentage point for each of these rates.
Inflation and economic uncertainties at the heart of the decision
The Egyptian Central Bank stated that this decision is grounded in a context of growing external challenges and high economic uncertainties, requiring monetary measures to preserve the stability of inflation expectations.
Raising interest rates is one of the principal tools used by central banks to curb inflationary pressures, notably by affecting the cost of credit and the demand for financing.
This decision also comes as the Egyptian pound faces pressures against the U.S. dollar. However, the central bank’s statement does not explicitly present the depreciation of the national currency as a direct cause of this rate hike.
