POLL-Egypt expected to leave interest rates on hold

By Patrick Werr

CAIRO, April 26 (Reuters) - Egypt's central bank is likely to leave its overnight interest unchanged on Wednesday, a Reuters poll showed, as increased commodity prices and dollar interest rates add to pressure to keep them high.

All but one of 20 analysts polled thought the Central Bank of Egypt (CBE) would leave rates unchanged at its regular monetary policy committee meeting. One analyst predicted a 50 basis point cut.

The central bank pushed the date of the committee meeting forward by a day after the government moved the Sinai Liberation Day holiday from Sunday to Thursday to give Egyptians a longer weekend.

The bank last cut its benchmark rates by 50 basis points (bps) in each of November and September after having slashed them by 300 bps in March 2020 to confront fallout from the coronavirus pandemic.

The overnight lending rate is now 9.25% and the overnight deposit rate 8.25%, their lowest since July 2014.

"The conditions pushing for a stable rate decision in the last MPC meeting still exist, namely an elevated interest rate environment (globally) and high commodity prices," said Mohamed Abu Basha of EFG Hermes.

James Swanston of Capital Economics also gave concern over higher inflation as a reason to keep rates on hold.

"We think the headline inflation rate will rise over the coming months. However, the continued weakness of inflation so far this year means there is a risk that policymakers move to cut interest rates sooner than we currently anticipate."

Urban consumer price inflation was 4.5% in March, unchanged from February but slightly higher than the 4.3% recorded in January. This is still below the 5% to 9% target range set by the central bank in December.

A draft budget sent to parliament this week forecast inflation of 7% in the financial year that will begin in July. The budget also forecast that economic growth would pick up to 5.4% next year from the 2.8% expected this year.

Alone among analysts, Farouk Soussa of Goldman Sachs predicted a 50 bps cut, saying the current interest rates implied real interest rates considerably higher than most of its emerging market peers.

(Reporting by Patrick Werr, Editing by William Maclean)


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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