Banks to review savings, lending rates following CBE’s 1% rate hike

Banks operating in the Egyptian market will begin reviewing interest rates on their savings products and loan offerings on Sunday, following the Central Bank of Egypt’s (CBE) decision last Thursday to raise key interest rates by one percentage point. The increase brought the overnight deposit rate to 20%, the overnight lending rate to 21%, and both the main operation rate and the discount rate to 20.5%.

The CBE’s key interest rates are a strong indicator of the direction of Egyptian pound interest rates in the short term.

In the first response to the decision, interest rates on variable-rate certificates of deposit and certain loan products automatically linked to the CBE’s rates increased by the same percentage.

The Egyptian market offers several variable-rate savings certificates, most notably the National Bank of Egypt’s Platinum Certificate and Banque Misr’s Al Qimma Certificate, alongside a wide range of variable-rate loan products. The market is also awaiting the impact of the CBE’s 1-percentage-point rate increase on the yields of domestic debt instruments to be offered by the government this week, as well as its potential effect on foreign investors’ appetite for these instruments.

The CBE’s Monetary Policy Committee (MPC) decided to raise key interest rates by 1 percentage point, bringing the overnight deposit rate to 20%, the overnight lending rate to 21%, and the main operation and discount rates to 20.5%. The decision followed five consecutive rate holds on September 24, August 20, July 9, May 21 and April 2.

On behalf of the Ministry of Finance, the CBE is scheduled to offer two Treasury bill auctions on Sunday, worth a combined EGP 110bn. The first will be worth EGP 30bn with a 91-day maturity, while the second will amount to EGP 80bn with a 273-day maturity.

On Monday, the CBE will also offer four Treasury bond auctions worth a total of EGP 27bn. These will include a EGP 5bn variable-yield bond with a one-and-a-half-year maturity and a fixed-yield bond of the same value and maturity, in addition to a EGP 15bn fixed-yield bond with a three-year maturity and a EGP 2bn fixed-yield bond with a five-year maturity.