The Central Bank of Egypt has announced a 2% increase in key policy rates following its scheduled meeting on Thursday. The decision was made in response to the continued rise of inflation in the country. The bank’s Monetary Policy Committee noted in a press release that inflation is being driven by “supply chain disruptions domestically, the depreciation of the Egyptian pound… and demand side pressures.”
The increase in interest rates is the latest in a series of efforts made by the Central Bank to control inflation. Despite raising interest rates multiple times in 2022, the bank has been unable to curb inflation, which has risen considerably since early last year. Annual headline inflation reached 32.9% in February, largely driven by rising food prices.
The Egyptian pound has also seen a recent decline against the US dollar, according to the Central Bank. The exchange rate went from 19 pounds per dollar in October 2022 to 30 pounds per dollar currently, reflecting ongoing economic challenges in the country.
In addition, several Gulf central banks recently raised interest rates in response to the US Federal Reserve’s decision to do the same. Some observers, however, have criticised the Fed’s rate hikes as being too aggressive and potentially contributing to global financial turmoil, including the collapse of Silicon Valley Bank.
On Wednesday, Egypt’s cabinet approved its budget for the 2023-24 fiscal year, which includes 20% more allocations for food subsidies and 24% more for fuel subsidies. The budget still needs to be approved by parliament. The Central Bank’s Monetary Policy Committee is set to meet again on May 18.
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