A report released by HSBC expect the Central Bank of Egypt to raise interest rates by 3 percent at the Monetary Policy Committee meeting on Thursday, March 30, 2023.
The Monetary Policy Committee maintained interest rates as they were at its first meeting in February 2023.
There are three main dimensions to increasing pressure on the pound’s exchange rate against the US dollar, the report said.
The central bank kept interest rates unchanged at its last meeting, after raising it by 8 percent more than four times in 2022.
The overnight deposit rate, overnight lending rate and main transaction interest rate remained unchanged at 16.25 percent, 17.25 percent and 16.75 percent, respectively.
HSBC bank added that the impact of the central bank’s interest rate hikes will increase the borrowing burden and slow down the pace of growth.
The bank said the CBE should pursue inflation-oriented monetary policy and have a real investment return on the Egyptian pound.
The bank stated that the real return – investment in the pound – is still negative at 15 percent relative to inflation, and that the central bank must therefore pursue a very strict monetary policy.
Annual core inflation rose to 40.3 percent in February 2023, compared to 31.2 percent in January, while the consumer price index registered a monthly rate of 8.1 percent in February 2023, compared to a monthly rate of 1.2 percent in February 2022, and a monthly rate of 6.3 percent in January 2023, according to Central Bank data.
The annual rate in Egyptian cities also rose to 31.9 percent in February, compared to 25.8 percent in January, according to a recent statement from the Central Agency for Public Mobilization and Statistics.