stutteringThe Monetary Policy Committee of the Central BankToday, Thursday, to discuss interest rates, for the first time after 7 years, in the absence of Tariq Amer, the governor of the Central Bank, who submitted his resignation.
The Monetary Policy Committee of the Central Bank of Egypt decided, at its last meeting on June 23, to keep the interest rate unchanged after increasing it by 300 basis points from the beginning of the year to date, as it raised the interest rate by 200 basis points in May and 100 basis points in March.
The annual general inflation in Egypt rose in July to 13.6%, compared to 13.2% in June. The annual increase in inflation came as a result of an increase in the monthly inflation rate by 1.3%, compared to its decline by 0.1% in June. This monthly increase was affected by a slight increase in food prices by 0.5%, as The decline in vegetable prices by 10% on a monthly basis helped reduce the inflation rate of food commodities, despite the increase in the inflation rate in the transportation sector on a monthly basis by 10.1% due to the movement of petroleum products prices.
Beltone Investment Bank expected that the Central Bank of Egypt would keep interest rates at the current levels during the Monetary Policy Committee’s meeting today; To be able to better assess the trajectory of inflation in August after the exchange rate depreciation, and given that the long-term Treasury yields have not yet reflected the 300 basis points increase in interest rates since the start of contractionary monetary policy, this indicates the chances of them rising that are still ready Ministry of Finance to accept more bids.
Beltone indicated that the recent developments of inflation readings indicate that it is contained in the same range during the past three months, which reduces the necessity to raise interest rates at the present time, adding that it is premature to resume raising interest rates – in light of exchange rate changes – affected by pressures on the economy. Balance of Payments Despite the improvement in the balance of trade and services.
Investment bank Beltone expected that it would record its highest level at 16.5% in August, with an average of 15.5% expected in the third quarter of 2022, and it also expected that the average inflation would reach 13.7% in 2022.
While Investment Bank HC expected the Central Bank of Egypt to raise the interest rate by 200 basis points, and to depreciate the currency by 9%, to reach 21.2 pounds against the dollar; To support the currency and combat dollarization, it also foresaw the possibility of reissuing certificates with high interest rates by state-owned banks to boost remittances, especially with the rising levels of income in the GCC countries.
HC attributed the reasons for its expectations to the likely average inflation of 14.2% over the remainder of the year, which is much higher than the target of the Central Bank of Egypt of 7% (+/- 2% for the fourth quarter of 2022), in light of the accumulated pressure on The Egyptian balance of payments, including first, the current account deficit for the fiscal year 21/22 at 4.8% of GDP, higher than the deficit of the previous year, which amounted to 4.6%, and secondly, a decrease in remittances of workers abroad for the month of April by 7% on a monthly basis to 3.1 billion Dollars, thirdly, the Egyptian banking sector’s net position of foreign currency liabilities (excluding the Central Bank of Egypt) widened to 11.5 billion US dollars in June, fourthly, the decline in foreign currency deposits, not included in the official reserve, to 0.89 billion US dollars in July from 11.2 billion dollars Fifthly, net international reserves amounted to $33.1 billion covering 4.71 months of imports. Sixth, Egypt’s external debt repayment schedule includes loan repayments (excluding GCC deposits) amounting to $12.1 billion during fiscal year 22/23.