Egypt hikes interest rates by 2 pct to contain inflation

CAIRO, March 30 (Xinhua) -- Egypt's Monetary Policy Committee (MPC) decided to raise the interest rates of the Central Bank of Egypt (CBE) by 200 basis points in a new bid to contain high inflation, the CBE said on Thursday.

The deposit and lending rates were raised to 18.25 percent and 19.25 percent, respectively, while the rate of the main operation and the discount rate were increased to 18.75 percent, the CBE said in a statement.

Egypt has been struggling to contain rising inflation over the past years, amid a shortage of foreign currency caused by the global economic repercussions of the COVID-19 pandemic and the Russia-Ukraine conflict.

Egypt's annual urban headline inflation increased to a record high of 25.8 percent and 31.9 percent in January and February 2023, respectively. Similarly, the annual core inflation recorded 31.2 percent in January and 40.3 percent in February 2023, marking a historical high, the CBE said.

The CBE's interest rate hike came a week after the Federal Reserve, the central bank of the United States, raised its key interest rate by 0.25 percentage point on March 22.

Egyptian economist Rashad Abdo said that the move will encourage Egyptians to deposit their money so to decrease demand for products in the markets, which would help reduce prices and lower inflation.

"More importantly, it encourages people not to dollarize their Egyptian pounds since the local currency interest rates in Egyptian banks are very high," Abdo, also head of the Egyptian Forum for Economic and Strategic Studies, told Xinhua.