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CBE raising interest rates by 2% explained

MPC decided that raising policy rates is necessary to contain inflationary pressures, which is consistent with achieving price stability.
22.05.22 | Source: Daily News Egypt

In a meeting on Thursday, the Monetary Policy Committee (MPC) decided to raise the Central Bank of Egypt’s (CBE) overnight deposit rate, overnight lending rate, and the rate of the main operation by 200 basis points to 11.25%, 12.25%, and 11.75%, respectively. The discount rate was also raised by 200 basis points to 11.75%.

The MPC said that global economic activity has slowed down due to ongoing tensions between Russia and Ukraine. Trade sanctions imposed on Russia and corresponding supply-chain bottlenecks have also elevated global commodity prices, such as international prices for oil and wheat, with the latter’s global supply also impacted by adverse weather conditions and poor harvests in select regions.

Meanwhile, global financial conditions have tightened, as major central banks have continued to both tighten policy rates and reduce asset purchase programmes with the aim of containing increased inflationary concerns in their respective countries. Additionally, recently introduced COVID-19 lockdowns in China have raised concerns about exacerbating existing global supply-chain disruptions.