Unexpected Rate Hike of Egypt’s Central Bank

The Central Bank of Egypt raised its inflation rates by 200 basis points on Thursday for the second time in two policy meetings in a row. Economists were surprised by this decision as the forecast was to maintain its current monetary policies.  

The overnight deposit rate increased to 18.75 percent from 16.75 percent while the overnight lending rate rose to 19.75 from 17.75 percent after the 200 points rate hike in May.  

In November, the Egyptian pound floated in November that reduced its value by half. Inflation followed that resulted in an inflation. Despite its core rate dropped in May, it was sustained the 30 percent year-on-year. This prompted the central bank to raise its interest rate by 300 basis points which that helped the country to secure a lending program from the International Monetary Fund worth $12 billion for three years. This is part of their aspirant reform to raise taxes and subsidy cuts.

According to the IMF, maintaining its economic reform program is necessary to keep an eye on the reform program and they see rate hike to be appropriate to execute.