CAIRO (REUTERS) - Egyptian Central Bank Governor Tarek Amer sought on Sunday (May 28) to defend a surprise decision to hike interest rates last week, saying a historic level of foreign investment of nearly US$1 billion (S$1.4 billion) entered the country within days of the rate increase.
The central bank raised its key interest rates by 200 basis points on May 21 in an attempt to curb soaring inflation of over 30 per cent. It was the first rate hike since a 300 basis point increase in November.
The decision was heavily criticised by Egypt's financial community, which said it would do little to curb rampant inflation while potentially sapping new investment.
The level of investment inflows that followed the hike "has not happened in the history of Egypt" and "reflected the success and soundness of the monetary policy," Amer was quoted by state news agency MENA as saying.
The central bank abandoned its currency peg of 8.8 Egyptian pounds to the US dollar on Nov 3, causing the pound to roughly halve in value in a bid to unlock foreign currency inflows and dry up a black market for dollars.
Amer said on Sunday that foreign currency inflows into the banking system since the float have reached about US$25 billion.