CBE raises interest rates by 100 bps, banks look into raising CD rates
The Central Bank of Egypt’s Monetary Policy Committee raised the benchmark interest rate by 100 bps on Thursday, the CBE said in a statement (pdf). It’s the central bank’s second rate hike this year. The CBE raised the overnight deposit rate to 11.75%, its highest level in over a decade, and hiked the overnight lending rate to 12.75%, its highest since 2008. The rate hike “is warranted to anchor inflation expectations over the medium-term,” the statement added. Speaking with Bloomberg, Capital Economics’ Jason Tuvey said he believes the hike “possibly prepares the grounds for another round of devaluation,” while EFG Hermes’ Mohamed Abu Basha believes the potential phase-out of electricity subsidies and arrival of the value-added tax in 2H2016 “indicate that there is room for further interest rate hikes later in the year.” The Wall Street Journal, Financial Times and Reuters have taken note of the decision. The central bank will next deliberate on interest rates on 28 July 2016.
Domestic banks have reportedly begun raising interest rates on certificates of deposit, with state-owned National Bank of Egypt, Banque Misr and Banque du Caire taking the lead, AMAY reported on Saturday. Banque Misr is set to hold a meeting to discuss the increase, while Misr Iran Development Bank Chairman is reportedly considering raising rates in the coming days. Banque du Caire Chairman Mounir El Zahid, however, stressed that mortgage, SME, and staff loans will not be affected.