Cairo March 6 2024: Egypt’s central bank said on Wednesday that it had hiked interest rates by 600 basis points at an unscheduled meeting and that it would allow the exchange rate to be set by market forces as it shifted to an inflation targeting regime.
The central bank raised the overnight lending rate to 28.25% and its overnight deposit rate to 27.25%.
It said it had decided to accelerate the monetary tightening process in order to fast-track the disinflation path and ensure a decline in underlying inflation.
“To ensure a smooth transition, the CBE will continue to target inflation as its nominal anchor, allowing the exchange rate to be determined by market forces,” the central bank said in a statement.
“The unification of the exchange rate is crucial, as it facilitates the elimination of foreign exchange backlogs,” it said.
“Mindful of the lagged impact of the MPC’s decision to raise key policy rates by an additional 600 basis points, the committee will continue to assess the balance of risks surrounding the inflation outlook with the aim of strengthening credibility and placing inflation on a downward trajectory. The MPC judges that this tightening brings the monetary stance to a sufficiently restrictive level, to anchor inflation expectations, and will be maintained for as long as necessary to achieve the desired disinflation course” the central bank added.
