The Central Bank of Egypt (CBE) is likely to leave interest rates on hold when it meets this Thursday despite forecasts for rising inflation at home and higher interest rates abroad.
Analysts expect the Monetary Policy Committee to maintain the benchmark rate at 8.25%, adding that the Egyptian pound carry trade won’t face immediate pressure from rising US rates, and that inflation is unlikely to rise above the central bank’s target range.
Additionally, inflation will continue to rise in the coming months, with most forecasting the headline urban rate to average between 7-7.5% during the first six months of 2022 as rising oil and food prices filter through to the local economy.
Analysts also expect the central bank could consider raising rates later this year as global rates tick higher.
The central bank has held interest rates steady for over a year, leaving the overnight deposit rate at 8.25% since making a 50 bps cut in November 2020.
Additionally, the lending rate has remained at 9.25% while the main operation and discount rates are both at 8.75%.
Egypt currently offers a real return of around 4%, which compares favorably to rates in the US and other high-interest rate emerging markets such as Turkey.