Egypt’s central bank will raise its overnight deposit rate by 50 basis points (bps) on Thursday as it seeks to dampen surging inflation, a Reuters poll forecast.
The median forecast in a poll of 17 analysts is for the Central Bank of Egypt (CBE) to raise deposit rates to 11.75% at its regular monetary policy committee meeting. The lending rate would rise by a median of 25 bps to 12.50%, they predicted.
The bank raised rates by 200 bps at its last meeting on May 19, saying it was seeking to contain inflation expectations after prices surged by their quickest in three years.
In March, it raised rates by 100 bps, its first increase in nearly 18 months, citing the crisis in Ukraine.
Pascal Devaux of BNP Paribas GB said persisting inflationary pressure in Egypt weighed on the central bank.
“In a context of hawkish Fed policy and pressure on Egyptianexternal liquidity, a significant rise in CBE rate is needed for a recovery in portfolio inflows,” Devaux said.
The US Federal Reserve raised interest rates by 75 bps on June 15, its largest increase in more than a quarter of a century as it sought to stem a surge in inflation.
Egypt’s annual urban consumer inflation accelerated to 13.5%in May from 10.5% in April, fuelled by rising commodity prices and a weakening currency. Core inflation jumped to 13.3% in May from 11.9% in April.
The central bank has an inflation target range of 5%-9%, but last month said it would tolerate a higher level until after the fourth quarter.
Many analysts, however, believed the bank would leave rates unchanged until it was clear how the previous increases had affected inflation.
“The CBE is likely to take a breather at the next meeting, having already hiked 300 bps in its last two meetings and ahead of some important inflation-moving factors in July and August, including the upcoming quarterly fuel price adjustment,” said Mohamed Abu Basha of EFG Hermes.