Egypt minister sees rate hike as temporary

cairo — Egypt’s Deputy Finance Minister for Treasury, Mohamed Meait, said on Saturday he expected higher interest rates to be a temporary measure to control inflation, which he saw declining early next year.

The central bank, faced with accelerating inflation, on Thursday raised its key interest rates by 200 basis points for the second policy meeting in a row, wrongfooting economists who had forecast no change.

“We expect the interest rate decision to be a temporary measure to target inflation,” Meait told Reuters. “We expect inflation to fall in early 2018 and thus [can] begin cutting interest rates.”

Egypt floated the pound in November, and since then the currency has roughly halved in value, sending inflation surging. Although the core inflation rate slipped in May, it remains almost 30 per cent year on year.

Meait also said the two increases in base rates this year were not taken into account in the state budget for the 2017/18 fiscal year, which parliament passed last week.

The interest on current and future debt was calculated at 381 billion pounds, Meait said, who expected adjustments to that figure in light of the change in borrowing costs. — Reuters