Egypt’s Central Bank raises interest rates to highest level since 2017

Egypt’s Central Bank (CBE) raised on Wednesday the interest rates by 2 percent; reaching the highest level since July 2017.

The Monetary Policy Committee (MPC) decided to raise key policy rates by 200 bps.

In its meeting, the overnight deposit rate, overnight lending rate, and the rate of the main operation was raised by 200 bps to 18.25 percent, 19.25 percent, and 18.75 percent, respectively.

The discount rate was also raised by 200 bps to 18.75 percent.

On the global front, forecasts for international commodity prices have eased compared to those underlying the previous MPC meeting, but their outlook remains uncertain.

 Notable factors include the outlook for global supply bottlenecks and global economic activity, especially in light of the reopening in China coupled with the recent financial sector issues in advanced economies.

The latter factor has contributed to large volatility in financial conditions indices in key markets such as the US and EU, which confirms an increased level of uncertainty regarding the global economic outlook. Domestically, growth in real economic activity moderated to 3.9 percent in 2022 Q4 compared to 4.4 percent in 2022 Q3, implying that growth during the first half of FY 2022/23 registered 4.2 percent.

Detailed sectoral data for 2022 Q3 show that growth was primarily driven by the improvement in private sector activity, specifically tourism, agriculture and trade.

Additionally, most leading indicators continue to register positive growth rates in 2023 Q1. Going forward, real GDP growth is expected to soften in fiscal year 2022/23 compared to the previous fiscal year, before picking up thereafter.