Higher interest rates in Egypt could have a slight impact in containing inflation that is mainly driven by supply issues, Bloomberg reported on April 14th, citing Governor of the Central Bank of Egypt (CBE) Hassan Abdalla.

“We will not hesitate to do more but we need to be very careful,” Abdalla said in rare public comments during the spring meetings of the World Bank and the International Monetary Fund (IMF) in Washington, pointing out that “interest rate is not the only tool.”

During the meetings, Abdalla remarks laid out a strategy that goes beyond monetary policy to tackle the fastest inflation that Egypt has witnessed since the aftermath of the currency crisis in 2016.

"A lot of our inflation is imported and a lot of it is due to supply problems," Abdallah said. “Not only supply prices but supply issues including a backlog that has resulted from some previous regulations. And this in itself is not and will not be addressed by interest rates.”

He also confirmed that the CBE would not hesitate to embrace monetary policy to reach its inflation target.

Furthermore, he added that Egypt is working on boosting transmission mechanisms to enable the central bank of having “more effective interest rates”.

On March 30th, the CBE’s Monetary Policy Committee (MPC) raised interest rates by 200 basis points (bps), marking the first-rate hike in 2023.

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