2023-05-17 10:36:00
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Investing.com – The Central Bank will hold its third meeting this year, tomorrow, Thursday, to issue a report, amid mixed expectations among institutions and economists.
This comes in conjunction with Moody’s decision hours ago regarding the status of the credit rating of five Egyptian banks under review with a view to downgrading.
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Interest decision.. What is expected?
The Central Bank raised interest rates last March by 200 basis points for the first time in the new year, in line with the expectations of analysts and international investment banks, following it raised interest rates by 800 basis points last year, in an effort to absorb the wave of inflation, and in order to attract foreign investments in hard currency for government debt instruments. After leaving the Egyptian market, regarding $22 billion, following the Russian-Ukrainian crisis.
The interest rate is now on one-night deposits, one-night lending, and the main transaction rate, at the levels of 18.25%, 19.25%, and 18.75%, respectively, and the credit and discount rate amounted to 18.75%.
The Research Department of HC Securities and Investment expected that the Monetary Policy Committee of the Central Bank of Egypt, during its meeting next Thursday, will raise the interest rate on deposits and overnight lending by 100 basis points.
Heba Mounir, of HC Securities, said the rate hike would be for reasons in part to attract foreign investors and help curb inflation as well.
She pointed out, “The recent decline in the inflation rate will be short-lived, and we expect inflation to rise by 1 percent on a monthly basis in May, following the recent increase in diesel prices and changes in the ration card system.”
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A Archyde.com poll, conducted on Monday, showed that the Central Bank of Egypt is expected to leave overnight interest rates unchanged on Thursday, following a slight decline in inflation in April and following a 200 basis point interest rate hike in March.
The average forecast of 14 analysts is that the central bank will maintain the interest rate on deposits at 18.25 percent and the lending rate at 19.25 percent when its Monetary Policy Committee holds its regular meeting. Three analysts expected an increase in interest rates of 100 basis points, and a fourth analyst expected an increase of 200 basis points.
Monica Malik, of Abu Dhabi Commercial Bank, predicted that the Monetary Policy Committee would not change interest rates on Thursday following raising them by 200 basis points in March, and that inflation would slow.
“Nevertheless, we don’t think inflation or interest rates have peaked in Egypt yet. The timing of the next interest rate hike will be crucial. And if done with broader reforms, it might boost investor sentiment,” she said.
Amr El Alfy, Head of Prime Research, expected that the Central Bank of Egypt (CBE) would move to fix interest rates, especially following raising interest rates at the last meeting by regarding 200 points, as well as the slowdown in inflation in April.
Hani Aboul Fotouh, an Egyptian banking expert, also suggested that the Central Bank of Egypt (CBE) will fix interest rates on deposits and lending at tomorrow’s next meeting of the Monetary Policy Committee of the Central Bank of Egypt.
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Rating review
Yesterday, Moody’s decided to place the credit rating of five Egyptian banks under review with a view to downgrading, namely the National Bank of Egypt, Banque Misr, Banque du Caire, Commercial International Bank and Bank of Alexandria.
This comes regarding a week following the agency placed the rating of Egypt’s issuances in foreign and local currencies at B3 under review with a view to downgrading, and attributed this to slower-than-expected progress in the sale of assets owned by the Egyptian state.
Egypt is facing an acute shortage of foreign currency, despite allowing the pound to devalue sharply in the past few months.
Moody’s attributed the decision to place the country’s issuances in foreign and local currencies under review with the aim of reducing the risks surrounding Egypt’s financing plans.
The agency said that the slow progress in the asset sale strategy weakens foreign exchange liquidity in Egypt and undermines confidence in the Egyptian currency.
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