The central bank also raised the credit and discount rate by 200 basis points, to 11.75 percent.
What do these decisions mean? What are its benefits and risks to the Egyptian economy?
The economic expert and advisor to the Arab Center for Studies, Abu Bakr Al-Deeb, believes that raising the interest is an expected step that achieves 3 benefits, the most important of which is curbing inflation, preserving hot money, and controlling financial policy by reducing the size of the monetary mass inside the markets. on the available liquidity.
This means, according to Al-Deeb’s talk to “Sky News Arabia”, that “bank deposits have become one of the forms of investment for individuals and institutions, by placing them in accounts and charging interest on them on a monthly, quarterly or annual basis according to the new interest, and the higher the interest rate set by the bank. The Central Bank of Egypt will automatically increase the interest rate on existing and new loans in currencies denominated in or linked to the currency of the Central Bank.
Al-Deeb explains that “in contrast, there are 3 risks, namely stagnation, a decline in the growth rate, and damage to the stock exchange and investment, as the period of the liquidity cycle within the markets declines.”
However, the economist believes that the decision to raise the interest rate is very important, because it “coincides with the trend of global central banks to adopt a strict monetary policy by raising their interest rates, in light of the accelerating inflation wave due to the situation of the global economy and the state of rebound in supply chains, and the Ukrainian crisis came to lead to more The acceleration is due to a slowdown in the supply of grain and an increase in energy prices in general.
It is reported that “the Central Bank of Egypt had surprised everyone by holding an extraordinary meeting of the Monetary Policy Committee on March 21, when it decided to raise interest rates by 100 basis points on deposit and lending, to reach 9.25 and 10.25 percent, respectively,” and thus this is the time The second in which the Central Bank of Egypt decides to raise interest rates since July 2017.
And last week, the Governor of the Central Bank of Egypt, Tariq Amer, said, in a speech during a conference of the Union of Arab Banks in Cairo, that moving the exchange rate of the Egyptian pound against the dollar last March boosted dollar revenues by 30 percent.
A Reuters poll expected the Central Bank of Egypt to raise the overnight deposit rate by 175 basis points, after the US Federal Reserve raised interest rates and the prices of basic commodities imports rose due to the Ukraine crisis.
The bank had raised interest rates by 100 basis points in a surprise meeting on March 21, and attributed this to global inflationary pressures exacerbated by the war in Ukraine, after keeping them unchanged for nearly 18 months, and on the same day the pound fell against the dollar by 14 percent.
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