Egypt set to hold rates; di­vi­sion over moves in com­ing months

Kuwait Times - - BUSINESS -

Egypt’s cen­tral bank is seen hold­ing in­ter­est rates steady to­mor­row, a Reuters poll showed, and econ­o­mists ex­pect it will wait to gauge the im­pact of a sur­prise rate hike this month and might then move rates in ei­ther di­rec­tion. On Nov. 3, the bank ditched its peg of 8.8 per dol­lar and hiked rates by 300 ba­sis points to sta­bi­lize the newly floated pound. Its ini­tial guide level was 13 to the dol­lar and on Tues­day it al­lowed the pound to drift to about 15.50.

The move has helped Egypt se­cure a $12 bil­lion loan from the In­ter­na­tional Mon­e­tary Fund to sup­port a plan to over­haul its dol­lar-starved econ­omy and un­lock for­eign in­vest­ment. All 15 econ­o­mists polled by Reuters ex­pected the mon­e­tary pol­icy com­mit­tee (MPC) on Nov. 17 to hold overnight de­posit rates at 14.75 per­cent and overnight lend­ing rates at 15.75 per­cent. Their fore­casts for the next few months were di­vided. Some ex­pect a cut by the end of the year while oth­ers ex­pect more hikes. Most ex­pect the cen­tral bank to wait and see what ef­fect float­ing the pound and rais­ing rates has be­fore it acts. “The cen­tral bank has al­ready taken some ac­tion to counter stronger price pres­sures stem­ming from a weaker cur­rency,” Cap­i­tal Eco­nomics said in a re­search note.

“Rates have now been raised by a cu­mu­la­tive 550 ba­sis points this year. Ac­cord­ingly... pol­i­cy­mak­ers are likely to stand pat at this month’s meet­ing and await ev­i­dence of the im­pact from the pound’s float.” Egypt’s core in­fla­tion jumped in Oc­to­ber but an­nual ur­ban con­sumer price in­fla­tion eased for the sec­ond con­sec­u­tive month af­ter hit­ting an eight-year high in Au­gust.

As part of its deal with the IMF, how­ever, the govern­ment is push­ing through with eco­nomic re­forms that are ex­pected to raise in­fla­tion. It has im­posed a Value Added Tax, cut elec­tric­ity sub­si­dies and raised fuel prices in the last few months alone. Among those polled, Cap­i­tal Eco­nomics fore­casts an ad­di­tional 150 ba­sis point rate hike over the next six to 12 months while Signet In­sti­tute, a Cairobased think tank, ex­pects a re­duc­tion to­ward the end of this year. — Reuters

Newspapers in English

Newspapers from Kuwait

© PressReader. All rights reserved.