A Reuters poll conducted today, Monday, showed that the Central Bank of Egypt is expected to leave overnight interest rates unchanged on Thursday, after a slight decline in inflation in April and after raising interest rates by 200 basis points in March.
The average forecast of 14 analysts is that the Central Bank will maintain the interest rate on deposits at 18.25% and the lending rate at 19.25% when its Monetary Policy Committee holds its regular meeting. Three analysts expected an increase in interest rates by 100 basis points, and a fourth analyst expected an increase of 200 basis points.
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 total increase to 1,000 basis points since 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 eased from 2.7% in March to 1.7% in April.
Monica Malik of Abu Dhabi Commercial Bank predicted the Monetary Policy Committee would not change interest rates on Thursday after raising them by 200 basis points in March and slowing inflation.
“Nevertheless, we don’t think inflation or interest rates have peaked in Egypt yet. The timing of the next interest rate hike will be crucial. If it is done with broader reforms, it could boost investor sentiment,” she said.
Heba Mounir of HC Securities expected the Monetary Policy Committee to raise interest rates by 100 basis points, partly to attract foreign investors and help curb inflation as well.
“We see that the recent decline in the inflation rate will be short-lived and we expect inflation to rise by 1% on a monthly basis in May after the recent increase in diesel prices and changes in the ration card system,” she said.
Since the Russian invasion of Ukraine, which led to a mass exodus of foreign investment, the central bank has allowed the Egyptian pound to lose half its value against the dollar, which in turn pressured the government to raise subsidized prices for important imported consumer goods.