Egypt's rate hike viewed with skepticism as inflation persists

Amr Emam

In this picture taken on March 22, 2023, a woman speaks with a merchant as she shops for dates at the traditional Rod el-Farag market in northern Cairo during the Muslim holy fasting month of Ramadan. - Muslims follow the tradition set by the prophet Mohammed whom believers say used to break his fast by eating dates and drinking goat's milk during the holy month. The dawn-to-dusk fast is conceived as a spiritual struggle against the seduction of earthly pleasures, but the evening iftar festive meals traditi — In this picture taken on March 22, 2023, a woman speaks with a merchant as she shops for dates at the traditional Rod el-Farag market in northern Cairo during the Muslim holy fasting month of Ramadan. - Muslims follow the tradition set by the prophet Mohammed whom believers say used to break his fast by eating dates and drinking goat's milk during the holy month. — KHALED DESOUKI/AFP via Getty Images

CAIRO — The recent interest rate hike by the Central Bank of Egypt has raised hopes of reining in Egypt's runaway inflation and propping up the Egyptian pound that has been steadily losing value to foreign currencies. Nevertheless, the failure of recurrent rate hikes over the past year is feeding skepticism among some economists about the ability of the new rate lift to succeed while previous ones had failed.

"The latest rate increase cannot succeed where previous ones had failed because our government follows an expansionary policy, instead of the contractionary one it should be following," Alia al-Mahdi, former dean of the School of Economics and Political Science at Cairo University, told Al-Monitor.

The Monetary Policy Committee, the decision-making body of the central bank, raised March 30 key interest rates by 2%, for the first time in 2023 and the fifth time since March of last year.

It raised the overnight deposit rate, overnight lending rate and main operation rate to 18.25%, 19.25% and 18.75%, respectively.

Egypt's rate hike viewed with skepticism as inflation persists

Economists question the logic behind Egypt's new interest rate hike, especially after previous raises failed to bring the inflation rate down.

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