Central Bank’s decision on interest rates eagerly anticipated by Egyptians

Millions of Egyptians are waiting tomorrow, Thursday, March 30, 2023, for a meeting of the Monetary Policy Committee of the Central Bank of Egypt to determine the fate of the interest rate.

At its previous meeting on February 2, the Monetary Policy Committee of the Central Bank of Egypt kept the lending rate at 17.25% and the deposit rate at 16.25%, saying an 800 basis point increase over the past year would help tame inflation.

The meeting of the Central Bank of Egypt takes place a few days after the meeting of the US Federal Reserve, which decided to raise interest rates by 25 basis points.

Egyptian economist Abu Bakr El-Deeb expected an interest rate hike by the Monetary Policy Committee of the Central Bank of Egypt at a meeting next Thursday.

El-Deeb explained that interest rates will be raised by 2-3% to combat inflation, the main rate of which, according to the latest data from the Central Bank, was about 40.3%.

Abu Bakr El-Deeb confirmed in RT statements that the annual inflation rate in Egyptian cities jumped to 31.9% in February last year, compared to 25.8% in January last year, the Central Agency for Public Mobilization and Statistics said earlier.

Abu Bakr Al-Deeb said the committee meeting is the second in 2023 and that the Central Bank has raised its interest rate over the last year by 8%, indicating an increase in annual core inflation to 40.3% during February 2023. compared to 31.2% in January last year, and the current interest rate in Egypt is 16.25% on deposits and 17.25% on loans.

Abu Bakr Al-Deeb said that the Central Bank will resort to raising the interest rate by 3% at its next meeting in order to curb inflation and control price growth after fixing the interest rate at its last meeting.

He explained that raising the interest rate is one of the tools by which the Central Bank tames inflation and encourages investment in the Egyptian pound.

El-Deeb expected new savings certificates to be issued in Egypt to absorb liquidity of around £700bn on the 18% certificates that were offered last year, with maturities starting on the 22nd of this month.

He pointed out that the Central Bank decided to fix the interest rate at the first meeting of the monetary policy committee this year on February 2, after raising it by 8% 4 times over the past year, the last of which was 3% in December last year, in order to fix its interest rate of 16.25% on deposits and 17.25% on loans.

He said that high inflation indicates an increase in the level of liquidity in the market, which could prompt the central bank to absorb this liquidity and reduce consumer demand in exchange for stimulating investment in banks.

Abu Bakr Al-Deeb pointed out that the US Federal Reserve at its second meeting this year decided to raise interest rates for the ninth consecutive time by 0.25%, a slower rate of increase than expected due to a wave of US bank failures. , to fix the dollar interest rate at a level between 4.75% and 5%, saying that the change in the policy of the US Central Bank will greatly affect emerging markets and push them to change monetary policy.

He called for the launch of a future plan to coordinate monetary and fiscal policy to provide the government with more support and tax breaks to curb inflation and support industry and exports.

Source: RT