[Asia Economy Reporter Park Byung-hee] Egypt has sharply raised its benchmark interest rate by 2 percentage points at once to curb inflation.
On the 19th, the Central Bank of Egypt announced that it would raise the benchmark interest rate by 2 percentage points, increasing the deposit rate to 11.25% and the lending rate to 12.25%. In a Bloomberg survey, only one out of nine economists expected a 2 percentage point hike. Most predicted a 1 percentage point increase.
Egypt, the most populous country in North Africa, is facing significant difficulties due to the Russia-Ukraine war. Egypt is the world's largest wheat importer. Before the outbreak of the war, Egypt imported 80% of the wheat it consumed from Russia and Ukraine.
As the war triggered supply instability in wheat, food prices surged, pushing Egypt's consumer price inflation to the highest level in nearly 30 years. Egypt's consumer price inflation rate in April recorded 13.1%.
The rise in wheat prices has also increased social unrest in Egypt. In 2011, the rise in wheat prices sparked popular protests that led to the ousting of Hosni Mubarak, the dictator who ruled Egypt with an iron fist for 30 years.
The Egyptian pound also plummeted sharply this year. On March 21, just before Russia invaded Ukraine, the value of the Egyptian pound fell by more than 15% in a single day, and on the same day, the Central Bank of Egypt raised the benchmark interest rate by 1 percentage point. At that time, it was the first rate hike since 2017.
The Central Bank of Egypt has set an inflation target of 7%, with an allowable range of plus or minus 2 percentage points.
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