The Central Bank of Egypt violated market expectations and raised interest rates by 100 basis points to 19.25%.
The Central Bank of Egypt raised interest rates last March by 200 basis points for the first time this year, after it raised them by 800 basis points last year, in an effort to absorb the wave of inflation, and in order to attract foreign investments in hard currency for government debt instruments, after about 22 billion came out of the market. Dollars after the Russian-Ukrainian crisis.
The bank’s Monetary Policy Committee raised, at its meeting Thursday evening, interest rates on overnight deposits, overnight lending, and the main transaction rate, to levels of 19.25%, 20.25%, and 19.75%, respectively.
Expectations to keep the interest rate in Egypt unchanged due to the scarcity of the dollar
6 investment banks had expected, in the “East Economy” survey, that the “Central” would keep interest rates as they are, due to the lack of abundant liquidity of hard currency in the country.
Inflation in Egypt’s cities jumped, on an annual basis, during last June to 35.7% from 32.7% in May, under pressure from the government’s hike in diesel prices, the scarcity of hard currency needed for imports, and the return of goods to the ports.
The Egyptian currency trades in the official market at 30.95 pounds per dollar, while it has ranged in the parallel market trading since last March at about 38-39 pounds per dollar.
Before today’s decision, the real interest rate in Egypt (ie the nominal interest rate minus the inflation rate) was negative 17.45%, according to the latest inflation data.
2023-08-03 18:29:14
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