In its meeting Thursday, the monetary policy committee in the Central Bank of Egypt has decided to fix the interest rates on deposits at 9.25 per cent and on the one night lending at 10.25 per cent for the seventh time since February, in an attempt to maintain the bank’s monetary policy and to control inflation.
The committee also decided to maintain the seven-day repurchase agreement (repo) rate at the level of 9.75 per cent and the discount rate at 9.5 per cent.
The Egyptian Association for Financial and Investment Studies welcomed the bank’s decision saying that it will have a positive impact on the stock market and the whole economy, reported Al-Ahram.
The former CEO of the United Bank and banking expert, Tarek Helmy sees the decision as more political than economic, the Central Bank is keen to maintain the interest rate unchanged, “when the interest rate on treasury bonds raises, the budget deficit increases.”
The banking expert explained that 50 per cent of the already existing banks’ deposits as well as 75 per cent of the new ones are channelled to buy treasury bills and bonds; this leaves little amounts of money to be invested in other projects.
“The objective of the monetary policy should be to target inflation” said Helmy, “and hence it is important to increase interest rates as a means to absorb the liquidity and to increase savings”, he also said that investment in treasury bills should be regulated so it doesn’t exceed 25 per cent of the bank’s available funds.
Helmy also stated that the rates announced by the Central Bank are only a benchmark, and that the banks are free to change them, he added that the Central Bank is a part of the government and is hence confined to serve its best interests.