Egypt’s cenbank seen holding key interest rates on Thursday

CAIRO, March 27, (RTRS): Egypt’s central bank is expected to shrug off soaring inflation once again and keep interest rates on hold for the fourth meeting in a row since it aggressively hiked rates by 300 basis points in November, a Reuters poll showed.

Urban consumer inflation soared to its highest level in more than three decades, hitting 30.2 percent in February, its fourth consecutive monthly jump since the central bank abandoned its currency peg to the US dollar on Nov 3, roughly halving the value of the pound.

The pound has stabilised at around 18 per dollar for the past week. Egypt’s floatation of the pound is part of the country’s economic reforms which helped it secure a $12 billion threeyear loan program from the International Monetary Fund in November.

Fourteen out of 15 economists polled by Reuters forecast the bank will hold overnight deposit rates at 14.75 percent and overnight lending rates at 15.75 percent at its monetary policy meeting on Thursday. One economist expects a hike in rates.

“The effects of the 50 percent drop in the pound against the dollar since November have continued to filter through. Inflation has also been pushed up by subsidy cuts and the recent introduction of a value-added tax,” Capital Economics said in a report.

“These effects are likely to prove temporary and the CBE already took pre-emptive action when it hiked interest rates by 300 basis points at the time of the pound’s float. As it happens, we think inflation is close to peaking and should fall in the second half of the year,” the report said.

President Abdel Fattah el-Sisi is under increasing pressure to revive the economy, keep prices under control and create jobs to avoid a backlash from the public.