HSBC report expects significant rise in interest rates in Egypt

A report issued by HSBC expects the Central Bank of Egypt to raise the interest rate by 3 percent at the Monetary Policy Committee meeting on Thursday, March 30, 2023.

The Monetary Policy Committee keept the interest rates as they were at its first meeting in 2023, in February.

There are three main dimensions in increasing pressure on the exchange rate of the pound against the US dollar, the report stated.

The central bank kept interest rates at its last meeting unchanged, after raising it 8 percent, over four times in 2022.

The overnight deposit rate, overnight lending rate, and the rate of the main operation were kept unchanged at 16.25 percent, 17.25 percent, and 16.75 percent, respectively.

HSBC bank added that the consequences of the central bank’s interest hikes will increase the burden of borrowing and slow the growth rate.

The bank said the CBE must follow though an inflation-targeted monetary policy and to have a real return on investment on the Egyptian pound.

The bank stated that the real return – investment in the pound – is still negative at 15 percent against inflation, and therefore the central bank needs to follow a very strict monetary policy.

The annual core inflation rate jumped to 40.3 percent during February 2023, compared to 31.2 percent in January, while the consumer price index recorded a monthly rate of 8.1 percent during 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 the Central Bank’s data.

The annual rate in Egyptian cities also jumped during February to 31.9 percent compared to 25.8 percent in January, according to a recent statement from the Central Agency for Public Mobilization and Statistics.

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