World Economy

Egypt Raises Interest Rates

Egypt Raises Interest RatesEgypt Raises Interest Rates

Egypt’s central bank raised its key interest rates by 100 basis points on Thursday to their highest levels in years, in a move economists said was intended to rein in surging inflation and ease downward pressure on the Egyptian pound.

The Monetary Policy Committee raised the overnight deposit rate from 10.75% to 11.75%, its highest level in over a decade. It hiked the overnight lending rate from 11.75% to 12.75%, its highest since 2008.

The increases exceeded the forecasts of most economists polled by Reuters this week. More than half of them said the central bank would keep policy rates unchanged.

“After evaluating the balance of risks surrounding the inflation outlook to date, the MPC judges that a rate hike is warranted to anchor inflation expectations over the medium term,” the central bank said in a statement.

Urban consumer price inflation rose to 12.3% in May. Core inflation, which excludes items with volatile prices, such as fruit and vegetables, rose to an annual 12.23% last month, a seven-year high.

President Abdel Fattah al-Sisi is under growing pressure to revive the economy and keep prices under control. The country has struggled to restore economic growth since a 2011 uprising ended the 30-year rule of Hosni Mubarak. The turmoil scared off tourists and foreign investors, key sources of hard currency.

The central bank devalued the pound to 8.78 per dollar in March and raised interest rates by 150 basis points days later to control inflation. But prices have continued to rise and the pound continues to face pressure on the black market.

The pound slid against the dollar again last Tuesday, with the black market rate now at 10.95 per dollar.