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The Daily Star: Egypt to raise banks’ reserve requirement as it battles soaring inflation

The reserve ratio, used to control money supply, will increase to 14 percent from 10 percent from Oct. 10.
05.10.17 | Interesting article at The Daily Star

Egypt’s central bank will increase the reserve requirement for lenders next week, potentially paving the way for cutting interest rates even as it battles soaring inflation triggered by a sharp currency devaluation. The reserve ratio, used to control money supply, will increase to 14 percent from 10 percent from Oct. 10, the regulator said Tuesday. It said the measure was “suitable” given the banks’ performance and profitability.

The pound has lost about half its value to the dollar since it was floated in November to end a crippling currency shortage, helping to send inflation above 30 percent and heaping pressure on struggling households. The central bank responded by capping lending to the government and raising interest rates by 7 percentage points, but now faces criticism from business leaders who argue that high borrowing costs stifle growth and add to the debt-servicing bill.