Why do Egyptians prefer high interest rates?

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At a time when the Monetary Policy Committee of the Central Bank of Egypt is preparing to decide the fate of interest rates during a meeting to be held tomorrow, Thursday, a large segment of Egyptians is betting on raising interest rates.

On social media platforms, and during the past hours, the question began about the expectations regarding the fate of interest rates, and it appeared from the discussions and questions that a large number of participants tended to the Central Bank of Egypt to raise interest rates. This is due to the dependence of a large segment of financial surplus owners on benefiting from high interest rates and interest trading.

This phenomenon dates back to 2017. Launching the economic reform program For several months, the floating of the Egyptian pound against the dollar and the liberalization of the exchange market caused inflation to touch historical and record levels at 35%, which prompted the Central Bank of Egypt to use interest in controlling inflation rates and controlling price hikes.

In November 2017, the Monetary Policy Committee headed by Tarek Amer, Governor of the Central Bank of Egypt, decided to fix the interest rates on deposit and lending, at 18.75% and 19.75%, respectively, and the main operation rate of the Central Bank at 19.25% and the credit and discount rate at 19.25%.

At the end of 2018, the Monetary Policy Committee of the Central Bank of Egypt decided to maintain the overnight deposit and lending rates at the level of 16.75% and 17.75%, respectively, and to keep both the main operation rate at the level of 17.25% and the credit and discount rate at the level of 17.25%. .

During 2019, the Central Bank of Egypt reduced the interest rate 4 times in a row by 100 basis points, to reach 12.25% on deposit and 13.25% on lending, on November 14, 2019, compared to about 13.25% on deposit and 14.25% On lending, on September 26, 2019, 14.25% on deposit, 15.25% on lending, on August 22, 2019, 15.75% on deposit, and 16.75% on lending, on February 14, 2019.

At the end of 2020, the Central Bank decided to fix the interest rate unchanged, as the Monetary Policy Committee decided to keep the deposit and lending returns at the level of 8.25% and 9.25%, respectively.

During its August meeting, the Monetary Policy Committee decided to fix the overnight deposit and lending rates and the main operation rate at the level of 8.25% and 9.25%, respectively, for the sixth time in a row. It also decided to keep the credit and discount rate at 8.75%.

In a recent research note, the investment bank “Beltone” expected that the Monetary Policy Committee of the Central Bank of Egypt would keep interest rates unchanged during its meeting tomorrow, Thursday. He added: “The developments in annual general inflation readings confirm the expected upward trend from our side for inflation, approaching the central target range at 7% (±2%) on average by the fourth quarter of 2022… due to the rise in food commodity prices on a monthly basis (in recent months). ), which coincided with a significant rise in world commodity prices.

The bank continued, “The annual general inflation reading for Egypt witnessed a slight increase to 5.7% in August compared to 5.4% in July, lower than our estimates at 6.2%. The annual reading reflects an increase of 0.1% on a monthly basis compared to an increase of 0.9% in July, lower From our estimates, it is affected by the stability of food prices, compared to an increase of about 0.5% in the previous month.”



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