Egypt’s Central Bank Hikes Key Interest Rates by 2% and Currency Slides to Record Low
In an exceptional unscheduled meeting convened on October 27th, 2022, the Central Bank of Egypt (“CBE”) lifted the deposit and lending rate by 200 bps to reach 13.25% for the overnight deposit rate and 14.25% for the overnight lending rate.
In a statement released on Thursday morning, the CBE stated that the decision is primarily designed to offset rising inflation, which passed 15% in September this year, and to contain the demand-side pressures.
The statement also provided that the CBE had moved to a durably flexible exchange rate regime, leaving the forces of supply and demand to determine the value of the Egyptian pound (“EGP”) against other foreign currencies.
Shortly, following the CBE decision, the EGP dropped in value against the U.S dollar (“USD”) for more than 14% from around EGP 19.75 to USD 1 to EGP 22.5 to USD 1. This drop in value led to record the lowest value of the EGP against the USD in history.