- The Monetary Policy Committee of the Central Bank of Egypt will hold its third regular meeting this year tomorrow, Thursday, to discuss the fate of the central bank’s basic interest rates, which are the main indicator of the direction of the pound’s interest rate in the short term.
- The committee had decided in an extraordinary meeting on March 6 to raise these rates by 6% at once, to reach 27.25% for deposits, 28.25% for lending, and 27.75% for the central bank’s main operation rate and the credit and discount rate.
- The committee said, in its statement accompanying this decision, that it was necessary to accelerate the process of monetary restriction in order to accelerate inflation’s arrival on its downward path and ensure a decline in monthly rates of inflation, stressing the importance of controlling inflationary expectations, and what the restrictive policy requires of raising basic interest rates to reach Real rates of return to positive levels.
- She explained that the local economy has recently been affected by a shortage of foreign currency resources, which has led to the emergence of a parallel market for the exchange rate and a slowdown in economic growth, and the external repercussions resulting from global inflationary pressures have continued to accumulate coinciding with the global economy being exposed to successive shocks, pointing out that those shocks Its repercussions led to a rise in uncertainty and inflation expectations, which increased inflationary pressures. The resulting exchange rate movements, in addition to the rise in global prices of basic commodities, in addition to local supply shocks, led to the continuation of inflationary pressures, which in turn pushed the general inflation rate to record levels. Standard.
- The Committee confirmed that despite the recent slowdown in annual inflation rates, they are expected to exceed the target rate announced by the Central Bank of Egypt, which amounts to 7% ± 2% on average during the fourth quarter of 2024.
- According to the Committee, the elimination of the parallel foreign exchange market is expected to reduce inflationary expectations and curb inflation, and thus general inflation is expected to follow a downward path in the medium term, after the gradual decline of inflationary pressures associated with the unification of the exchange rate.
- She pointed out that the risks surrounding inflation expectations include regional geopolitical tensions, fluctuations in global commodity markets and global financial conditions, explaining that in light of these risks and changes, a clear announcement will be made about the re-evaluation of the target inflation rates it sets.
- The Monetary Policy Committee believes that the decision to raise the key interest rates by 6% will help tighten monetary conditions in a manner consistent with the targeted path to reduce inflation rates, noting that these levels will be maintained until inflation converges with its desired path.
- Earlier this month, the Central Bank of Egypt revealed that the core consumer price index, prepared by it, recorded a monthly rate of 0.3% in April 2024, compared to 1.4% in the previous March, while the annual core inflation rate declined to 31.8%, compared to 33.7%.
- The Central Agency for Public Mobilization also revealed that the annual inflation rate in cities declined to 32.5% by the end of April 2024, compared to 33.3% in the previous March, while the inflation rate in cities rose on a monthly basis from 1% to 1.1%.
- For its part, 10 investment banks expected the Monetary Policy Committee of the Central Bank of Egypt to fix the basic interest rates at the Central Bank in its meeting tomorrow, Thursday.
- The list of these banks includes HC Securities and Investment, EFG Holding, Zilla Capital, Naeem Financial, Beltone Holding, CI Capital, Mubasher Financial, Al Ahly Pharos, Thand, and Arab African International Securities.
- The Financial Research Department at HC Securities and Investment expects the Monetary Policy Committee of the Central Bank of Egypt to keep interest rates unchanged at its meeting scheduled for tomorrow, Thursday, in light of the latest developments in the Egyptian macroeconomic situation.
