Egypt Surprises With Jumbo Rate Hike to Tackle Inflation

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Egypt surprised most economists by delivering its biggest interest-rate hike in nearly half a decade, an attempt to tackle soaring inflation and restore the allure of its local debt with foreign investors, Bloomberg News reported. The central bank increased the deposit and lending rates by 200 basis points each to 11.25% and 12.25% respectively, the Monetary Policy Committee said Thursday in a statement. Only one economist in a survey of nine correctly predicted the decision, with most forecasting an increase of 100 basis points. Egypt is the latest emerging economy to opt for a bold move against the background of global monetary tightening designed to smother inflation fanned by the war in Ukraine. It acted hours after South Africa raised rates by the biggest margin in more than six years and the Philippine central bank hiked its benchmark for the first time since 2018. “In light of the current global monetary trends, Egypt’s central bank is trying to avoid potential pressures on the pound,” said Radwa El-Swaify, head of research at Cairo-based Al Ahly Pharos. The hike also “takes into account local consumer price trends” and reduces the magnitude of the country’s inflation-adjusted negative interest rate, she said. A major food importer, Egypt is racing to deal with record grain prices fueled by the conflict in Europe. The most populous Arab nation previously bought most of its wheat from Ukraine and Russia. The latter has also been a major source of visitors for its key tourism industry. Read more.
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