To combat inflation, Egypt raises interest rates by 2%

 In a fresh effort to rein in high inflation, Egypt's Monetary Policy Committee (MPC) agreed to increase the central bank's interest rates by 200 basis points.

According to a statement released by the Central Bank of Egypt (CBE) on Thursday, the deposit and lending rates have been raised to 18.25 and 19.25 percent, respectively, while the primary operation and discount rates have been raised to 18.75 percent.

Over the past few years, Egypt has struggled to control rising inflation in the midst of a foreign currency shortage brought on by the ongoing Russia-Ukraine conflict and the Covid-19 pandemic's effects on the world economy.

In January and February 2023, respectively, Egypt's annual urban headline inflation rose to record highs of 25.8% and 31.90%.

Similar to this, the annual core inflation reached a historic peak of 40.3% in February 2023 and 31.2% in January, according to the CBE.

A week after the US Federal Reserve increased its benchmark interest rate by 0.25 percentage points on March 22, the central bank raised its interest rate.

According to Egyptian economist Rashad Abdo, the action will motivate people to deposit their money, which will reduce demand for goods in the market and, in turn, help bring down prices and inflation.

More significantly, Abdo, who is also the director of the Egyptian Forum for Economic and Strategic Studies, said, "it encourages people not to dollarize their Egyptian pounds because the local currency interest rates in Egyptian banks are very high."