Contrary to expectations, the Central Bank of Egypt keeps interest rates unchanged

The Central Bank of Egypt said in a statement today, Thursday, that it kept key interest rates unchanged at the Monetary Policy Committee’s meeting.

The committee kept the overnight lending rate at 12.25%, and the overnight deposit rate at 11.25%.

The median forecast of 17 analysts polled by Reuters had indicated the bank would raise the overnight deposit rate to 11.75% from 11.25% at the committee’s regular meeting, and raise the lending rate by 25 basis points to 12.50%.

The committee raised interest rates in the past two meetings, after keeping them unchanged for nearly 18 months, as it raised them by 100 basis points in a surprise meeting on March 21, and on the same day, the pound exchange rate against the dollar fell by 14%, then increased it by 200 basis points in the May 19 meeting. Past.

Consumer price inflation in Egyptian cities rose to 13.5% in May, from 13.1% in April, with the increase in the prices of basic commodities and the depreciation of the currency. Core inflation increased to 13.3 percent in May, compared to 11.9 percent in April.

The central bank targets inflation between 5% and 9%, but said last month that it would tolerate higher levels until the end of the year.

The Monetary Policy Committee considers that the global developments resulting from the Russian and Ukrainian crises are primary supply shocks that are outside the scope of monetary policy, although these shocks may lead to exceeding the previously announced inflation targets.

She said that monetary policy tools are used to control inflation expectations, reduce inflationary pressures from the demand side and the secondary effects of supply shocks, which may lead to inflation rates being relatively higher than the targeted inflation rates. Given the current initial supply shocks, inflation rates may deviate relatively from the central bank’s target inflation rate of 7% (± 2 percentage points) on average during the fourth quarter of 2022, and then gradually decline again.

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A report by Standard & Poor’s Global this week warned that the credit ratings of a number of countries were affected by the interest rate hike, which it said was hurting their already fragile financial conditions, and that Egypt, Ukraine, Brazil and Ghana are among the most vulnerable emerging markets.