What Led Egypt to Keep Interest Rates Constant for the Second Time?

Yesterday, on Thursday, the Monetary Policy Committee of the Central Bank of Egypt decided to fix interest rates on deposits and overnight loans, as well as the price of the main operation of the Central Bank.

Interest rates were set for the second time in a row and the third time in a year at 18.25%, 19.25% and 18.75% respectively, which is a necessary condition for achieving the target inflation rate of 7% (±2 percentage points) on average for the fourth quarter of 2024 and 5% (± 2 percentage points) on average for the fourth quarter of 2026.

In this regard, Karim Radwan, a researcher and economic analyst, said that the decision of the Central Bank’s Monetary Policy Committee to fix the interest rate has many reasons and consequences for economic conditions and the pound, and at the beginning, the decision is linked to the recent decision of the Federal Reserve US system to fix interest rates. After raising them 15 times before, this is also the third time that the Central Bank of Egypt has fixed interest rates in a year.

Radwan added in exclusive statements to the Sada El Balad website that the decision to fix or raise the interest rate is not random, but rather is being explored with the aim of lowering the inflation rate in the first place, which has not been decreasing for some time, but for the last 3 months there is a relative stability in inflation, although the target is 7%, but it has broken through the current 30%.

The researcher and economic analyst explained that in terms of the impact of interest rate fixing on the dollar, the dollar is stable, and the state has managed to strike a balance, albeit relative, between the official price of the dollar and the price in a parallel currency. Also, recent statements by the president have confirmed that the national security of the citizen will not be compromised, and it is the first time a new term has been used indicating that the president is interested in the security and stability of the conditions of citizens and the calming of Egyptian streets and public opinion.

Radwan pointed out that one of the reasons for the tendency to fix the interest rate is to maintain the stability of the volume of deposits in the banking system, because if the value of the currency depreciates or interest increases, it hurts the economy on the other hand, because the recent certificates that were offered with a yield 18%, 25% and others represent a burden on the banking system when the due date is due and therefore it was expected that the interest would be fixed and the certificates would not be issued because the statements would have to be returned when due.

He continued: An increase in the interest rate or a devaluation of the currency will harm the government’s efforts to encourage investment because interest rates will be high for investors who need loans and therefore projects will not be funded, which could affect the investment climate.

The Central Bank explained that global commodity price expectations, compared to those presented to the Monetary Policy Committee at its previous meeting, and global inflationary pressures have eased as a result of several factors, including the tightening of monetary policy by many central banks, decline in world oil prices, in addition to lower inflation rates Bottlenecks in global supply chains.

He pointed to continued growth expectations for the global economy, and the volatility of financial conditions in advanced economies has declined from what was presented to the Monetary Policy Committee at its previous meeting.

He stressed that the committee will be closely monitoring inflation-related risks that could arise from disruptions in the supply chain, as well as geopolitical tensions and other factors. He will also keep an eye on all economic developments and will not hesitate to adjust his policies to achieve the goal of price stability.

Source: RT