CBE Governor: ‘We will not Hesitate’ to Take Further Steps to Contain Inflation

The Governor of the Central Bank of Egypt (CBE) Hassan Abdullah confirmed that the bank did not and will not hesitate to use monetary policy to counter inflation.

The givernor added that Egypt has taken huge measures to mitigate the repercussions of the coronavirus pandemic and the Russian military operation in Ukraine on the Egyptian economy, he added, "We are ready to take further measures."

Abdullah added - in statements on Friday on the sidelines of his participation in the annual spring meetings of the International Monetary Fund (IMF) and the World Bank Group in Washington - that the main focus of the Central Bank of Egypt in the current period is to curb inflation to a range between 5% and 9%, by Q4 of 2026.

Inflation has remained in double digits since the intensification of the Russian-Ukrainian crisis in the spring of 2022, as it jumped to the highest level in 5 years, 32%, last March.

However, core inflation has fallen below 40% over the past month, according to the latest figures from the central bank.

Abdullah explained that the Central Bank was analyzing different models to understand the drivers behind the inflation numbers, and the analysis showed that the inflation Egypt was not only driven by commodity prices, but also by supply-side problems such as the recent buildup in imports (at ports).

The central bank governor indicated that since March 2022, Egypt has raised key interest rates and devalued the local currency, "which are important steps."

Abdullah explained that the Central Bank and the Ministry of Finance have daily coordination between fiscal and monetary policies, in order to face the ongoing economic challenges, adding 'We work closely with the Cabinet and we have all the support from the political leadership'.

An Egyptian delegation is currently participating in the Spring Meetings of the IMF and the World Bank in Washington, where they discuss issues related to the first review of the IMF.

Meanwhile, Abdullah said - during a panel discussion yesterday, at the headquarters of the International Monetary Fund - that Egypt has a strong banking system that has helped the country over the years in facing all economic challenges.

During the session, he highlighted the Central Bank's efforts to improve the cash transfer mechanism and implement measures to enhance the effectiveness of interest rates.

The money transfer mechanism is a process through which monetary policy decisions affect the economy in general and the price level in particular.

In this regard, Abdullah said that Egypt has moved by 10% in this process, stressing that the Central Bank is taking measures to move forward in this process.

The Monetary Policy Committee of the Central Bank is scheduled to meet next May to review key interest rates in light of recent economic developments at the local and global levels.