Egypt’s central bank raises interest rates by 1%

CAIRO – 3 August 2023: The Monetary Policy Committee of the Central Bank of Egypt decided, Thursday, to raise its interest rates by 1 percent.

The rates of the overnight deposit and lending return were raised by 100 basis points, to reach 19.25%, 20.25% and 19.75%, respectively.

The credit and discount rates were raised by 100 basis points to 19.75%.

The Central Bank of Egypt explained the reasons for raising the interest rate in Egypt by 1%, by 100 basis points, after keeping the interest rate unchanged for three times during the current year 2023.

Egypt’s CBE confirmed that the annual rate of general inflation in urban areas rose to 35.7% in June 2023 from 32.7% in May 2023, and the annual rate of core inflation rose to 41.0% in June 2023 from a rate of 40.3% in May 2023. Driven by a broad-based rise in the prices of most consumer price index items as a result of persistent supply shocks.

The Central Bank of Egypt indicated that, in light of these mentioned reasons, and taking into account the balance of risks surrounding inflation, the Monetary Policy Committee decided to raise the basic interest rates at the Central Bank by 100 basis points -1% to avoid inflationary pressures and control inflation expectations.

It was noted that CBE’s monetary policy committee believes that inflation rates are expected to peak in the second half of 2023, before returning to the previously announced target inflation rates, supported by restrictive monetary policies so far.

The Monetary Policy Committee stated that the course of basic interest rates depends on expected inflation rates and not the prevailing inflation rates.

CBE said that, globally, the commodity price expectations continued to decline compared to the expectations presented to the Monetary Policy Committee during its meeting in June 2023.

On the other hand, actual oil prices rose over the past month. Inflation expectations have also declined in some major economies, although they remain above target levels.

With regard to the labor market, the unemployment rate decreased to 7.1% during the first quarter of 2023, compared to an average of 7.2% during the previous quarter, mainly due to the increase in the number of workers.