Cairo – Mubasher: In light of global pressures and the increase in inflation rates in Egypt, which rose to the highest level in 3 years, in addition to the decline in the exchange rate of the pound against the dollar, the weight of the balance is increasing, which favors the direction of the Egyptian Central Bank to increase interest rates at its next meeting..
The majority of locals and economic experts suggested that the Central Bank of Egypt would return to the monetary tightening policy and raise interest rates at its next meeting by between 50 to 200 points, in light of the continued high inflation rates and the strict policy of the US Federal Reserve. Commodity prices, inflation peaking in August, and no need to increase interest rates.
Data from the Central Agency for Public Mobilization and Statistics revealed that the monthly inflation rate in Egypt increased during the month of July by 0.9 percent%.
The annual inflation rate for the total of the Republic increased to 14.6% for the month of July 2022, compared to 6.1% for the same month of the previous year.
No need to increase
Radwa Al-Swaify, head of Al-Ahly Pharos Securities Research, expected that the Central Bank will move to fix interest rates during its meeting next Thursday..
Al-Swaify attributed her expectations to the fact that inflation rates are expected to reach a peak next August, in addition to her expectations of a decline in commodity prices, stressing that there is no need for more interest rates to rise now..
Resume the stress cycle
James Swanston, an economic analyst for the Middle East and North Africa at Capital Economics, expected the Central Bank of Egypt to resume its strict policy, stressing that the high inflation rate in Egypt during the past month led to an increase in expectations of raising interest rates next Thursday..
In a recent research note, James Swanston pointed out that the inflation rate in Egypt rose in July to its highest level in 3 years on the back of an increase in domestic fuel prices and a weak currency..
And the economic analyst at Capital Economics expected that the Central Bank of Egypt will raise interest rates by 50 basis points at its meeting next Thursday, to raise the overnight deposit rate to 11.75% at its next meeting..
Moreover, Capital Economics has identified an additional 100 basis points of interest rate hikes in Egypt by the end of the year, which is more hawkish than the consensus expects..
In a related context, Monet Doss, Senior Analyst for Macroeconomics and Financial Services at HC Corporation, expected the Monetary Policy Committee to raise the interest rate by 200 basis points at its next meeting, Thursday, August 18..
“We believe that a 200 basis point interest rate hike in Egypt along with a 9% currency devaluation, based on our estimates, to EGP21.2/US is necessary to support the currency and combat dollarization,” said HC Senior Macroeconomic and Financial Services Analyst..
In the same context, Mona Mostafa, director of trading at Arabia Online Securities, expected the Central Bank of Egypt to raise interest rates by between 1.5 and 2%, suggesting that it would tend to increase the maximum limit of 2%, in light of its decision to fix interest rates in the previous meeting..
Mona Mostafa attributed her expectations to several factors, most notably the increase in inflation rates in July and expectations of its continuation in August, as well as the strict Federal Central policy, which represents pressure on the CBE’s policy and the necessity of its direction to increase interest rates..
The director of trading at Arabia Online indicated that, unlike the high inflation rates, the Central Bank may tend to increase interest to maintain foreign direct and indirect investments and maintain foreign cash flow for local debt instruments in light of the weakness of the currency and the obligations faced by the government in the current period..
Hani Genena, an economic analyst and lecturer at the American University in Cairo, expected that the Central Bank of Egypt would move to increase the interest rate by about 1% at its next meeting. .
Geneina added that increasing interest rates in Egypt may have a positive effect in attracting foreign investment in Egyptian treasury bills and bonds, especially if an agreement with the International Monetary Fund is announced..
The economic analyst pointed out that any rate hike in the absence of an agreement with the IMF will have little effect unless investment certificates with high returns such as the 18 certificates are issued.%.
On the other hand, Mona Badir, macroeconomic analyst at Prime Investment Bank, commented that inflationary pressures are still great and inflation has not reached its peak yet, which reinforces expectations of an increase in interest rates at the Monetary Policy Committee meeting of the Central Bank of Egypt at the end of this week..
For his part, Khaled El-Shafei, an economist, expected that the Egyptian Central Bank would tend to raise interest rates by between 50 and 100 points in the next meeting, according to the repercussions of global developments..
El-Shafei pointed to the trend of the US Federal Reserve in the past period to raise interest rates several times, which prompts the Central Bank of Egypt to move in the same direction to maintain foreign investments in debt instruments and increase their flows to be the best and highest destination in the eyes of foreign investors among the interest in its counterpart from emerging economies..
Meanwhile, Hani Aboul Fotouh, a banking expert, believes that the Central Bank of Egypt is in a difficult test and may go to increase the interest rate to curb the rising inflation rates, under pressure from the increase in gasoline and diesel prices last month, as well as the continued depreciation of the pound..
Aboul Fotouh suggested that the Central Bank of Egypt would move to increase interest rates and resume the strict policy, ranging between 1 to 2%, with a weighted increase of 1% at the meeting next Thursday..
Last June, the Monetary Policy Committee of the Central Bank of Egypt decided to keep the overnight deposit and lending rates, and the central bank’s main operation rate unchanged, at 11.25, 12.25 and 11.75%, respectively..
Last May, the Monetary Policy Committee of the Central Bank of Egypt decided to raise the overnight deposit and lending rates and the central bank’s main operation rate by 200 basis points to reach 11.25%, 12.25% and 11.75%, respectively..
Since the beginning of 2022, the Monetary Policy Committee of the Central Bank of Egypt has raised the interest rate by 300 basis points, as it raised interest by 200 basis points in May and 100 basis points in March, in conjunction with the cumulative rate cuts from the Federal Reserve by 225 basis points from the beginning of the year. To date.
Annual inflation in Egypt accelerated to 13.6 percent in July from 13.2 percent in the previous month, and monthly inflation rose 1.3 percent on a monthly basis, compared to a decline of 0.1 percent on a monthly basis in June, according to data published by the Central Agency for Public Mobilization and Statistics..