Opinions vary on interest rate expectations in Egypt next Thursday

Investment banks' expectations varied regarding the Central Bank of Egypt's interest rate decision next Thursday

Investment banks' expectations varied regarding the Central Bank of Egypt's interest rate decision next Thursday, especially with regard to the timing of the fuel price hike.

Half of the eight investment banks expected, today, Sunday, December 17, 2023, that the Central Bank of Egypt, during its eighth and final meeting of 2023, would raise interest rates by between 100 and 500 basis points to curb inflation, which is among the priorities in the economic reform program within the framework of the agreement with the IMF. International, while the other half expected interest rates to be fixed.

Save the dollar before the increase

The central bank had kept interest rates unchanged last month, after raising them by 1,100 basis points since March 2022 when it devalued the pound.

Macroeconomic analyst at CI Capital, Sarah Saada, expected that the Central Bank of Egypt would resort to keeping interest rates unchanged during the next meeting, and raising interest rates between 200 and 300 basis points early next year, in an emergency meeting.

She said: “Providing dollar liquidity before raising interest rates is necessary for the step to be beneficial in the face of inflation, especially since Egypt is close to reaching an agreement with the International Monetary Fund regarding an additional financing package that will work to provide the dollar.”

Inflation in Egyptian cities continues to slow to 34.6% in November

Inflation levels in Egypt are still high, although they slowed last month. The rise in consumer prices last month reached 34.6% on an annual basis, compared to 35.8% last October, with continued inflationary pressures in food and beverage prices, according to the Central Agency for Public Mobilization and Statistics. 

Macroeconomic analyst at the Arab African Securities Brokerage, Hani Amer, suggested that the Central Bank will keep interest rates unchanged during the next Monetary Policy Committee meeting, and believes that there are no fundamental changes that will push the Central Bank to raise interest rates now.

He pointed out that the increase in energy prices expected early next year, especially diesel, which will affect all goods and services, may then prompt the Central Bank to raise interest rates.

Egypt raises the price of gasoline

Last November, Egypt raised the prices of all categories of gasoline for the second time this year, while keeping the price of diesel unchanged, as the increase in the price of the lowest quality gasoline “80” and “92” gasoline amounted to 1.25 pounds per liter, and the increase in the price of “gasoline” amounted to 1.25 pounds per liter. 95,” one pound, according to a statement issued by the Automatic Pricing Committee for Petroleum Products at the time.

The chief economist at Cairo Capital, Hani Genena, expects that the central bank will raise interest rates by about 500 basis points in two stages, the first during the next meeting, whose date coincides with the end of this year, in which it will raise interest rates by about 300 basis points at the present time. And 200 basis points at the first meeting of the Monetary Policy Committee next year.