In its latest meeting, held on 16 September, the MPC decided to maintain the CBE’s overnight deposit rate, overnight lending rate, and the rate of the main operation unchanged at 8.25 percent, 9.25 percent, and 8.75 percent respectively.
The discount rate was also maintained at 8.75 percent.
Egypt’s headline annual inflation rose to 8 percent in September, up from 3.3 percent in the same month of 2020 and 6.4 percent in August 2021, according to the latest inflation readings declared by the Central Agency for Public Mobilisation and Statistics (CAPMAS).
The headline monthly inflation rate also increased in September by 1.6 percent, according to CAPMAS.
The consumer price inflation continues to soar in the domestic market, as the prices of food commodities, services, and transportation have increased by between 12 percent and 25 percent.
In its World Economic Outlook Report, released during October, the IMF projected headline inflation in emerging market and developing economies to jump to 6.8 percent by the end of 2021 before declining to about 4 percent in 2022, projecting an upside over the medium term.
Accordingly, the IMF has predicted that Egypt’s inflation rate will accelerate to 6.3 percent in 2022.
Head of macro and financials at HC Securities and Investment Monette Doss expects the MPC to keep the current interest rates unchanged due to September’s inflation figures, which remain within the CBE target range of 7 percent (+/- 2 percent) through the fourth quarter of 2022.
Doss projected Egypt’s inflation to average 5.9 percent in the fourth quarter of 2021.
“However, we believe that rising international prices of oil and other commodities impose significant inflationary pressures domestically, especially in light of recent official announcements of the government's intention to reduce its subsidy bill,” Doss explained.
Meanwhile, head of equity research Radwa El-Swaify expects the MPC will maintain the current interest rate.
“Despite the rise in inflation, it is still within the expected target of the CBE. Plus, raising rates will be the last resort, if what is happening globally starts to impact foreign inflows and local currency,” El-Swaify told Ahram Online.
She also ruled out the probability that the CBE will raise interest rates in 2021.
“It is possible that the CBE could increase the key interest rates in 2022, but it depends on the latest global and local developments,” said El-Swaify.