Egypt raises interest rates again as inflation continues to creep up

The Central Bank of Egypt raised interest rates on Thursday following its scheduled meeting. Inflation is continuing to rise in the North African country. 

The bank’s Monetary Policy Committee said it raised its key policy rates by 2%. The committee noted rising inflation in the country, attributing it in a press release to “supply chain disruptions domestically, the depreciation of the Egyptian pound … and demand side pressures." 

Why it matters: Inflation in Egypt has risen considerably since early last year, in part due to the supply chain shocks resulting from the Russian invasion of Ukraine. The Central Bank raised interest rates several times in 2022, including in December, but has been unable to curb inflation. Annual headline inflation reached 32.9% in February, largely driven by rising food prices. 

The Central Bank of Egypt did not raise interest rates during its last meeting in February.

The Egyptian pound has also fallen against the US dollar recently, as the Central Bank noted. One dollar traded at 19 Egyptian pounds in October of 2022. By January, the rate had reached 24 pounds and is now 30 pounds, according to market data. 

Several Gulf central banks raised interest rates earlier this month after the US Federal Reserve did the same. The Fed’s historically aggressive rate hikes targeting inflation are controversial due to the pressure they put on the financial system. Some observers link the high rates to the present global financial turmoil, including the collapse of Silicon Valley Bank. 

Know more: Egypt’s cabinet approved its budget for the 2023-24 fiscal year on Wednesday. The budget includes 20% more in allocations for food subsidies and 24% more for fuel subsidies, according to Daily News Egypt. The budget still needs to be approved by parliament. 

What's next: The Central Bank's Monetary Policy Committee will meet again on May 18.