Expectations of a new rate hike in Egypt after the Federal Reserve’s decision


Wednesday 02 November 2022

I wrote – Shaima Hefzy and Mustafa Eid:

Two analysts, with whom Masrawy spoke, expected that the Central Bank of Egypt would resort to a new interest rate hike in the next period following the US Federal Reserve’s decision to raise interest rates today, Wednesday.

The US Federal Reserve raised the interest rate by 0.75% for the fourth time in a row, bringing it to between 3.75% and 4%, after the rate of inflation continued to record high levels. registering 8.2% in September compared to 8.3% in August.

The two analysts agreed that the Egyptian central bank could raise interest rates by at least 1%, but they disagreed on the expected timing of such an increase.

On October 27, 2022, the Central Bank of Egypt decided to raise interest rates by 2% in an exceptional meeting, coinciding with the announcement by the Governor of the Central Bank to liberalize the exchange rate of the pound to be subject to demand and to the offer, which is the value of the pound against the dollar of about 16%.

Medhat Nafeh, an economist, told Masrawy that the recent interest rate hike by the Central Bank of Egypt should be “… followed by a new hike that could start with 1% to complete the 3% I have. said before “.

Hani Genena, an economist and lecturer at the American University, agrees with Nafie, expecting the CBE to raise interest rates between 1 and 2%.

Geneina told Masrawy: “… there is room to raise interest rates again by around 1 or 2%, and it could be the last increase in Egypt during this tightening cycle.”

Nafeh expected CBE to raise interest rates by 3% before CBE announced a 2% increase.

When will we see a new interest rate hike?

US Federal Reserve Chairman Jerome Powell suggested at a press conference today that interest rates in America be further hiked until inflation targets are reached at 2%.

Nafeh said: “There is nothing new under the sun. The Fed will continue its declared policy of monetary tightening at least until the first quarter of 2023 and until interest rates approach or move around 4%. “.

He said the Central Bank of Egypt is aware of this and, in turn, continues to absorb excess liquidity, close to a trillion pounds, from the market, which means the expectation of a new rise in interest rates.

Nafeh indicated that this new increase could take place during this November.

However, Hani Genena expects the decision to raise interest rates to be slightly delayed until the end of the year, or perhaps next year.

Genena said Egypt’s central bank may have to keep up with the rise in US interest rates at some point, “it could be in December or early in the year.”

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