Central Bank of Egypt s headquarters is seen in downtown Cairo, Egypt March 8, 2016. REUTERS
Most expectations posit that the MPC will keep the interest rates unchanged to maintain the local market’s stability and mitigate the outflow of hot money.
In its last meeting — held in May — the MPC raised the CBE’s key interest rates by 200 basis points (bps) or two percent.
Accordingly, the overnight deposit rate, overnight lending rate, rate of the main operation, and discount rate edged up to 11.25 percent, 12.25 percent, 11.75 percent, and 11.75 respectively.
The MPC sets the interest rates according to global and domestic macroeconomic updates.
In this regard, the US Federal Reserve (Fed) hiked its benchmark interest rates in June by an unprecedented 75 bps (0.75) — its highest increase since 1994 — as a response to the rising global inflationary wave.
On a local level, Egypt’s annual headline inflation hit 15.3 percent in May, up from the 4.9 percent recorded in May 2021 and 14.9 percent in April 2022.
It its recent report, HC Securities and Investment expected the CBE to maintain the current interest rates in Thursday’s meeting, attributing this to the fact that inflation in the country is imported due to the global supply chain disruptions and global inflationary wave that caused a shortage in food products.
In the same vein, Beltone Financial Holding anticipated the same, given the rate of inflation is slower than expected.
On the other hand, Prime Securities expects the MPC to raise the interest rates by 100 bps (one percent) in the next meeting due to the Fed’s significant hike in interest rates and to rein in inflation in the local market.
Speaking to Ahram Online, banking expert Hani Aboul-Fotouh expects the CBE to keep the interest rates unchanged in a bid to maintain investments in local debt instruments that are likely to exit the market at a significant pace on the heel of the US Fed’s latest hike in interest rates.
He also said that Egypt’s inflation readings for May were lower than expected, adding, however, that the CBE is likely to raise the interest rates by an extra 200 bps (two percent) by the end of 2022.
Since the outbreak of the Russian-Ukrainian War in March, the CBE raised its key interest rates twice with a total of 300 bps (three percent).
Following the hikes, the EGP was devalued by over 14 percent and $20 billion flowed out of the market, according to the latest figures released by Prime Minister Mostafa Madbouly.