Why Egypt Fixed Interest Rates: Economic Expert Explains the Sharp and Changing Economic Events

The Fixing of Interest Rates in Egypt: An Economic Expert’s Perspective

Introduction

Economic expert and analyst Hani Abu Al-Futuh commented on the fixing of interest rates in Egypt and said in an interview with RT that this move is due to the sharp and changing economic events that the country is suffering from.

The Central Bank’s Decision

Abu Al-Futuh said: “The Central Bank of Egypt recently announced its decision to keep the interest rate unchanged during the recent meeting of the Monetary Policy Committee. This decision is an expected and important step. This decision comes in light of the sharp and changing economic developments that the country is suffering from.”

Previous Interest Rate Hikes

“It is first noted that the Central Bank made this decision as a result of the ineffectiveness of raising the interest rate in controlling inflation or even bringing the inflation gap closer to the bank’s target of 7% (±2 percentage points) during the fourth quarter of 2024. This indicates that ‘previous interest rate hikes have not had the desired effect in fighting inflation.'”

“The central bank has raised interest rates by 11 percentage points since March 2022, but core inflation reached 40.4% at the end of August, making rate hikes an ineffective monetary tool for controlling inflation.”

“It should be noted that the Central Bank of Egypt increased interest rates 6 times between March 2022 and August 2023, by a total of 1,100 basis points. These increases were split between 800 basis points during 2022 and 300 basis points in March and August meetings of the year. Present tense.”

Causes of High Inflation

“It is important to understand that the reasons for the high inflation rate in Egypt are due to several factors, the most important of which is the foreign exchange shortage crisis. This crisis has affected the accumulation of goods in Egyptian ports and increased the cost of imports. The need for production and raw materials.

“In contrast, we can look to the experience of the United States, where monetary tightening over recent months has gradually brought down inflation, prompting the US Federal Reserve to stabilize interest rates at its latest meeting.”

Future Expectations

“The Central Bank of Egypt is expected to raise interest rates at the last meeting of the monetary policy committee in 2023.”

“This decision is related to the government’s ability to eliminate the root causes of rising inflation. Therefore, increasing the interest rate can play an important role in controlling inflation and stabilizing the economic situation.”

Cairo Nasser Hatem

Source: RT

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