Egypt’s central bank raises interest rates by 100 bps

CAIRO (Reuters) – The Central Bank of Egypt raised overnight interest rates by 100 basis points on Thursday in a surprise move, saying it sought to contain inflationary pressures and anchor inflation expectations.

The lending rate was increased to 20.25% and the deposit rate to 19.25%, the bank’s Monetary Policy Committee said in a statement.

Fifteen of 16 analysts polled by Reuters this week had expected the bank to leave rates unchanged, with the other expecting a 100 bps increase.

“The MPC judges that inflation rates are likely to peak in the second half of 2023 before beginning a disinflation path towards the CBE’s preannounced targets afterwards, supported by the cumulative monetary policy tightening to date,” the statement said.

Annual urban inflation accelerated to an all-time high of 35.7% in June from 32.7% in May.

“Tackling inflation seems to be the top priority for the CBE. Our preliminary estimates indicate urban CPI to have increased to 36.1% in July,” Allen Sandeep, of Naeem Brokerage, said.

The central bank has been targeting inflation of 5% to 9% by by the final quarter of 2023 and 3% to 7% by the end of 2026.

(Reporting by Nayera Abdallah; Writing by Patrick Werr; Editing by Chris Reese, Kevin Liffey and Alison Williams)