The Central Bank of Egypt’s (CBE) Monetary Policy Committee (MPC) did not change the interest rate during its meeting on Thursday despite the hike in inflation rate at the end of January—the highest in decades.
CBE had raised the interest rate three times in 2016. 1.5 % in 17 March, 1% in 16 June, and 3% in 3 November, reaching a total of 14.75% for deposits and 15.75% for loans.
On Monday, the CBE noted that its core inflation rate at the end of January hiked to 30.86%, up from 25.86% in December 2016. The monthly inflation rate in January registered 5%, up from 4.35% in December.
The CBE’s announcement came one day after the Central Agency for Public Mobilization and Statistics (CAPMAS) stated that the Consumer Price Index (CPI) rose to 28.14% in January, compared to 23.27% in December, while its general monthly average inflation rate recorded 4.07% in January, versus 3.13% in December.
Despite the record-high inflation, Reham Al-Desouky, senior economist at Arqaam Capital, believes that raising interest rates will not curb the increase in prices, explaining that the hike in inflation was not caused by an increase in the money supply, but as a natural result of the flotation and shortages in the main commodities in the market.
She said that inflation came as a result of increased costs.
“The current interest levels are enough to make investments in local currency attractive to local and foreign investors,” she concluded.