CAIRO - 22 December 2022: The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) holds a meeting on Thursday, Dec. 22, to discuss the interest rates.
Most of the expectations of economists and investment banks point to the Central Bank's direction for a new hike by about 100 points to 200 points, compared to a slight weighting in the direction of keeping the rates on hold.
The Central Agency for Public Mobilization and Statistics (CAPMAS) announced earlier that Egypt’s annual urban inflation rate rose to the highest level in five years during November 2022, driven by the rise in food prices and the continued pressures resulting from the Russian-Ukrainian crisis.
The CAPMAS announced that the annual urban inflation rate surged in November to 18.7 percent, compared to 16.2 percent in October.
This is the highest level of inflation recorded in Egypt since December 2017, when it recorded 21.9 percent, a month after the Central Bank of Egypt, led by its former president Tarek Amer, liberalized the exchange rate of the pound in November 2017.
According to the state-statistic body’s data, the annual inflation rate rose to 19.2 percent in November 2022, compared to 6.2 percent in the same month of prior year.
Egypt is witnessing an inflationary wave that has been accelerating almost every month since the beginning of this year, as a result of the high costs of importing energy and food, due to the Russian-Ukrainian crisis, and the Corona epidemic crisis.
Egypt reached an agreement with the International Monetary Fund (IMF), in November, worth $3 billion. It also devalued its currency twice, in March and late October, after an exit wave of hot money on the successor to the Ukraine crisis and the US interest rate hike on the dollar.
The Central Bank of Egypt (CBE) stated earlier that the inflation is higher than the expected average rate of 7 percent (±2 percentage points) in the fourth quarter of 2022, announcing that the new inflation rate targets will be announced soon.
On Oct. 27, the Central Bank of Egypt (CBE) announced the issuance of several decisions related to the exchange rate, interest rates and letters of credit for importing. The decisions which were taken in an exceptional meeting included raising the Central Bank of Egypt’s (CBE) interest rates by 200 basis points or 2 percent.
This led to a total rise in interest rates of 500 basis points in Egypt during 2022, coinciding with the Federal Reserve increasing interest rates by a total of 375 basis points from the beginning of the year until Nov. 3.
The CBE’s committee also announced moving to a durably flexible exchange rate regime, leaving the forces of supply and demand to determine the value of the Egyptian pound against other foreign currencies, which resulted in a 14 percent decrease in the exchange rate that day.
Moreover, the CBE began the process of gradually repealing the use of Letters of Credit for import finance, to be fully canceled in December 2022.
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