A Reuters poll from Monday showed that Egypt’s central bank is expected to leave overnight interest rates unchanged on Thursday, following a slight decline in inflation in April and a 200 basis point hike in interest rates in March.
The median forecast of 14 analysts is that the central bank will keep its deposit rate at 18.25% and lending rate at 19.25% when its monetary policy committee holds its regular meeting. Three analysts expected a 100 basis point increase in interest rates, while a fourth analyst expected a 200 basis point increase.
The Monetary Policy Committee, which seeks to control rising inflation, raised interest rates by 200 basis points at its last meeting on March 30, in line with expectations, bringing the overall increase to 1,000 basis points after Russia’s invasion of Ukraine in early 2022 .
Inflation in Egyptian cities rose to 32.7% in March, just below its all-time high, but fell to 30.6% in April. On a monthly basis, inflation fell from 2.7% in March to 1.7% in April.
Monica Malik of Commercial Bank Abu Dhabi predicted that the Monetary Policy Committee would not change interest rates on Thursday after raising 200 basis points in March and slowing inflation.
“However, we do not think that inflation or interest rates in Egypt have yet to peak. The timing of the next rate hike will be critical. And if broader reforms are implemented, it can boost investor sentiment,” she said.
Heba Munir of HC Securities expected the Monetary Policy Committee to raise interest rates by 100 basis points, partly to attract foreign investors, but also to curb inflation.
“We see that the recent decline in the inflation rate will be short-lived and we expect inflation to rise by 1% m/m in May following the recent increase in diesel prices and changes to the rationing system,” she said.
After the Russian invasion of Ukraine, which led to a massive outflow of foreign investment, the central bank allowed the Egyptian pound to lose half its value against the dollar, which in turn forced the government to raise subsidized prices for important imported consumer goods.
