The Monetary Policy Committee of the Central Bank of Egypt will hold its third periodic meeting this year on Thursday to discuss the fate of the basic interest rates, which are the most prominent indicator of the Egyptian pound’s interest rate in the short term.
The committee had decided, in its meeting held on 30 March to raise the basic interest rate at the Central Bank by 2%, to reach 18.25% for deposits, 19.25% for lending, and 18.75% for the credit and discount rate and the price of the main operation at the Central Bank.
The committee stressed, in its statement accompanying this decision, that the widespread rise in inflation requires more monetary restraint, not only to contain inflationary pressures from the demand side, but also to avoid secondary effects that may result from supply shocks, in order to control inflationary expectations of prices.
Last week, the Central Bank of Egypt revealed that the basic consumer price index, prepared by its side, had recorded a monthly rate of 1.7% in April 2023, compared to 2.4% in April 2022, and a monthly rate of 2.5% in March 2023.
The Central Bank indicated that the annual core inflation rate recorded 38.6% in April 2023, compared to 39.5% in March.
The Central Agency for Public Mobilization and Statistics had also revealed that the annual inflation rate in Egyptian cities had declined to 30.6% in April 2023, compared to 32.7% during the previous March.
It explained that the monthly inflation rate in cities also declined to 1.7% in April, compared to 2.7% in March.
According to the agency, the general index of consumer prices for the whole republic reached 169.6 points for the month of April 2023, recording an increase of 1.8% compared to March 2023.
The agency indicated that the annual inflation rate for the entire republic was 31.5% in April 2023, compared to 33.9% in the previous March, 14.9% in April 2022.
The Central Bank of Egypt confirmed earlier that restricting monetary policy is a prerequisite for achieving the target inflation rates of 7% (±2%) by the end of the fourth quarter of 2024 and 5% (±2%) by the end of the fourth quarter of 2026.
A poll conducted by Reuters showed that the Central Bank of Egypt is expected to decide to fix interest rates during its meeting tomorrow, after a slight decline in inflation in April and after raising interest rates by 2% in March.
The poll showed that 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%, while 3 analysts expected an increase in interest rates by 100 basis points, and a fourth analyst expected an increase of 200 basis points.
Investment banks Hermes, Beltone, Prime, Al-Ahly Pharos and Zila Capital expected to fix interest at tomorrow’s meeting, while CI Capital and HC expected to raise it by 1%.