Cairo, Egypt (CNN)–A few hours after Hassan Abdullah was appointed as acting governor of the Central Bank of Egypt, on Thursday, the Bank’s Monetary Policy Committee decided to fix the interest rate, expecting inflation rates to rise relatively than the central bank’s target inflation rate of 7% ( ±2 percentage points) on average during the fourth quarter of 2022.
Experts attributed the reasons for this fixation until the clarity of the monetary policy vision of the new governor, and so that any increase would not negatively affect the economy.
This is the fifth meeting of the Monetary Policy Committee of the Central Bank this year, and in its previous meetings it raised the interest rate by 300 basis points, as it raised the interest rate by 200 basis points in May and 100 basis points in March.
Economist Medhat Nafeh said that the decision to fix the interest rate is a postponement of the process of making a new interest decision until the monetary policy directions are known in light of the plan of the new central bank governor, who was appointed hours ago.
On Thursday, Egyptian President Abdel Fattah El-Sisi appointed Hassan Abdullah as acting central bank governor, 24 hours after Tarek Amer apologized for completing his second term 15 months before its expiry.
Nafeh added, in exclusive statements to CNN in Arabic, that the inflation rate in Egypt exceeded the Central Bank’s target of 7% (± 2 percentage points), which required that the Monetary Policy Committee take a decision to increase the interest rate, and added that the Committee may be satisfied with the Central Bank’s decision to withdraw 100 billion pounds of liquidity from the open market, a measure that is considered one of the monetary policy tools.
The annual general urban inflation rate in July 2022 resumed its upward trend that it had taken since December 2021, to record 13.6%, after it slowed in June 2022, recording 13.2%, and at the same time the annual rate of core inflation, which is Calculating it by excluding the group of fresh vegetables and fruits, as well as goods and services whose prices are set administratively, 15.6% in July 2022 compared to 14.6% in the previous month, according to a statement by the Central Bank.
The economic expert indicated that the central bank may use monetary tools to achieve stability in the inflation rate in the medium term, most notably maintaining the money supply at acceptable rates, reducing money printing, and absorbing liquidity from banks by selling papers to banks.
Medhat Nafeh described the appointment of Hassan Abdullah as governor of the Central Bank as a “successful choice”, as Abdullah combines the banking background through his work as Chairman of the Board of Directors and Managing Director of the Arab African Bank, and finally as Chairman of the Board of Directors of the United Media Services Company, which helps him achieve his vision, suggesting that Monetary policy gives greater priority to the economy and supports the business community.
The Monetary Policy Committee of the Central Bank affirmed that it “will closely follow all economic developments and will not hesitate to use all its monetary tools to achieve the goal of price stability in the medium term,” according to its statement.
Rania Yacoub, a member of the board of directors of the Egyptian Stock Exchange and Chairman of the Board of Directors of a stockbroking company, said that choosing Hassan Abdullah represents a new idea with different visions that suit the current stage, as he is one of the well-known banking personalities, who has banking experience that he gathered from working at the head of the Arab African Bank. In addition to his banking experience, he worked on leading major economic institutions, the latest of which was the presidency of the United Media Services Company.
In exclusive statements to CNN in Arabic, Yacoub believes that the decision to fix the interest rate is “wise” because the increase in the inflation rate was expected after the government’s decision to move the prices of petroleum products, noting that increasing the interest rate at any rate would negatively affect the cost of debt, the investment climate, and the general economic situation. Which is currently in a recession, and there are lingering hopes that the new governor will take other decisions and policies to open the door for exporters to follow flexible exchange rate policies.
Rania Yacoub stated that there are challenges facing the inflation rate in Egypt during the last quarter, as a result of expectations regarding an increase in the oil price, affected by high demand during the winter season, and the continuation of the Russian-Ukrainian war, which affects the inflation rate imported from abroad on prices in Egypt, and expected that the Bank The central bank will use its monetary tools to control inflation in the coming months.