The MPC raised overnight deposit rate, overnight lending rate and main operation rate to 18.25 percent, 19.25 percent and 18.75 percent, respectively.

The discount rate was also raised by 200 bps to 18.75 percent.

In February, during its first meeting of the year, the MPC maintained previous interest rates unchanged.

The increase is in line with analysts’ expectations, who suggested a hike ranging between two and three percent after seeing inflation hit record figures in Egypt.

The CBE explained that annual urban headline inflation continued to accelerate to 25.8 percent and 31.9 percent in January and February 2023, respectively.

The annual core inflation recorded 31.2 percent in January and marked a historic high in February, recording 40.3 percent.

“The strong dynamics witnessed reflect the combined effect of several factors. These factors include the supply chain disruptions domestically, the depreciation of the Egyptian pound, demand side pressures as evidenced by developments in real economic activity relative to potential capacity and high broad money growth outturns. In addition, the seasonal impact of Ramadan affected both Umrah trips and food prices,” the CBE statement read.

Meanwhile, Egypt’s real GDP growth slowed to 3.9 percent in the fourth quarter of 2022, up from 4.4 percent in the third quarter of the same year, bringing the growth during the first half of the current FY 2022/23 to 4.2 percent.

“Detailed sectoral data for 2022 Q3 shows that growth was primarily driven by improvements in private sector activity, specifically tourism, agriculture and trade. Additionally, most leading indicators continue to register positive growth rates in 2023 Q1,” the statement added.

Looking ahead, MPC expects the real GDP growth to slow down in the current FY2022/2023 compared to the previous fiscal year, before picking up thereafter.

The unemployment rate dropped to 7.2 percent in the fourth quarter of 2022, compared to 7.4 percent in the previous quarter.

The MPC asserted that the path of future monetary policy remains a function of forecasted inflation rather than prevailing inflation rates.

“The MPC stresses that achieving a tight monetary stance is a necessary condition to attain the CBE’s upcoming inflation targets of seven percent (± two percentage points) on average by 2024 Q4 and five percent (± two percentage points) on average by 2026 Q4. The MPC will continue to monitor all economic developments and will not hesitate to adjust its stance in line with its price stability mandate,” the committee said.

In 2022, the MPC hiked the key interest rates by a total of eight percent (800 bps) as a result of the US Federal Reserve’s tightening policy to preserve the stability of the local market and its prices, as well as to support the Egyptian pound, which had devalued against the US dollar by almost 100 percent in one year.