CAIRO – 21 March 2022: The Monetary Policy Committee (MPC) decided, Monday to raise the Central Bank of Egypt’s (CBE) overnight deposit rate, overnight lending rate, and the rate of the main operation by 100 basis points (bps) in an exceptional meeting to 9.25 percent, 10.25 percent, and 9.75 percent, respectively.
The discount rate was also raised by 100 bps to 9.75 percent.
This comes in light of the CBE’s monetary policy horizon of its inflation target of 7 percent (±2 percentage points) on average in 2022 Q4, the MPC decided to raise policy rates by 100 basis points to reign in inflationary pressures while supporting economic activity.
The MPC reiterated that the objective of raising policy rates is to anchor inflation expectations and contain second round effects of supply shocks stemming from exogenous factors outside the scope of monetary policy. Achieving low and stable inflation over the medium term supports real incomes and sustains the achieved competitiveness gains of the Egyptian economy.
The Central Agency for Public Mobilization and Statistics (CAPMAS) said that Egypt’s annual consumer price inflation recorded 10 percent in February 2022, compared to 4.9 percent in the same month of 2021.
As for urban inflation, it hiked to 8.8 percent in February, surging to its highest in nearly three years, up from 7.3 percent in February 2022. February's inflation figure was the highest since June 2019.
The Central Bank of Egypt (CBE) said in a statement that the annual core inflation rate recorded 7.2 percent in February 2022, compared to 6.3 percent in January 2022.
TThe CBE added that the Consumer Price Index in Egypt has recorded a monthly rate of 1.2 percent in February, compared to 0.3 percent for the same month last year, and to 0.8 percent in January 2022.
It elaborated that being keen on safeguarding the achieved macroeconomic stability, the CBE stresses on the importance of the exchange rate flexibility to act as a shock absorber to preserve Egypt’s competitiveness.
It pointed out that the global inflationary pressures began to build after the world economy emerged from the disruptions caused by the COVID-19 pandemic.
“These pressures became amplified with the recent Russia-Ukraine conflict. Rising international commodity prices resulting from further supply chain disruptions in addition to increased risk-off sentiment have added to domestic inflationary pressures as well as external imbalances,” it added.
The MPC noted that Egypt’s reform program has placed the economy on a strong footing to weather economic disruptions as they emerge.
“The hard-won macroeconomic gains have provided the CBE with a strong toolkit to implement its monetary policy and maintain price stability over the medium term and with solid buffers to insulate the economy from excessive volatility,” it added.
The MPC reiterated that the path of future policy rates remains a function of inflation expectations, rather than of prevailing inflation rates. The MPC will continue to closely monitor all economic developments and will not hesitate to utilize all available tools to achieve its price stability mandate over the medium term.