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Egypt allows exchange rate to be determined by market mechanisms: CBE

The Monetary Policy Committee of the Central Bank of Egypt (CBE) decided on Wednesday to allow the exchange rate to be determined according to market mechanisms.

In a Wednesday statement, the committee explained that this moves come to protect the requirements of sustainable development, and showcase the CBE’s commitment to maintaining price stability in the medium term.

The CBE is also committed to continuing its efforts to move towards flexible inflation, it said, by continuing to target inflation as a nominal anchor for monetary policy while allowing the exchange rate to be determined according to market mechanisms.

“Unifying the exchange rate is a very important measure, as it contributes to eliminating the accumulation of foreign currency demand following the closure of the gap between the official and parallel market exchange rates, the committee explained.

The CBE on Wednesday raised interest rates by 600 basis points, equivalent to six percent, to reach 27.25 percent.

According to the statement, the Monetary Policy Committee believes that the decision to raise key interest rates is expected to help tighten monetary conditions, in a manner consistent with the targeted path of reducing inflation rates.

The CBE stressed the importance of controlling inflation expectations. and what the restrictive policy requires of raising key interest rates to bring real interest rates to positive levels.

Edited translation from Al-Masry Al-Youm

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