Even though it has been two weeks since the Central Bank of Egypt (CBE) lifted its main interest rates by 1%, banks have not yet moved to raise interest on their saving instruments in pounds – which usually happens on the tail of every similar raise. Between some 40 banks working in Egypt, only four (National Bank of Egypt, Banque Misr, Banque Du Caire, and Industrial Development & Workers Bank of Egypt) increased their interest rates. Even among those banks, interest only increased on deposits and savings accounts and by no more than 1%. Daily News Egypt sought the reason for why banks are ignoring the CBE's decision and whether or not other banks will follow suit in the coming period. Deputy head of treasury at one of the banks operating in Egypt, Mohamed Hussein, said that the banks' management believe that the CBE's decision is only temporary, adding that the decision is likely to be reversed soon. Lifting the interest rates at the CBE is a move to attract liquidity from the market in order to curb inflation, which grew significantly in May and is predicted to grow even more in the coming months, he further explained. Hussein noted that the banking community has strong expectations that these high rates at the CBE will not last for long, considering the significant adverse impact this move has on the revitalisation of investment and the rates' high cost on domestic public debt. "Banks considered all of that," Hussein said. "They are not rushing to raise interest rates to avoid increasing costs of funds under the lack of appropriate investment aspects to cover those expenses." He explained that banks invest a large portion of their available liquidity in local currency in treasury bills and bonds in absence of significant demand for borrowing. The interest hike, however, failed to accommodate banks that raise their interest rate, which means banks will have to bear the additional cost if they were to increase their interest. Moreover, most banks are already offering special interest rates on their saving vessels, such as large and stable deposits; hence, they do not need to push interest rate up further, according to Hussein. The Monetary Policy Committee of the CBE decided to raise the interest rate at the CBE by 1% on Thursday 16 June. This move boosted the rate on deposits at the CBE to 11.75% and on lending to 12.75%, while the rate on main operations, credit, and debt register 12.25%. These rates are the highest recorded over 11 years, since the Monetary Policy Committee was established in June 2005. source: Daily news Egypt
