Al Arabiya expert: An expected reduction in the price of the Egyptian pound against the dollar
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The Egyptian Central Bank decides the fate of interest today
Dubai – Al Arabiya.net
Published on: September 21, 2023: 04:48 PM GST Last updated: September 21, 2023: 06:11 PM GST
Traders in Egypt are awaiting the Central Bank of Egypt’s decision regarding interest rates, amid expectations of them being fixed.
Chief economist and market strategist at Cairo Capital Securities, Hani Genena, expected that the Monetary Policy Committee of the Central Bank of Egypt would move to stabilize the interest rate at today’s meeting, for several reasons.
Genena said, in an interview with Al Arabiya, that the most prominent factors supporting the decision to stabilize interest rates in Egypt is the Monetary Policy Committee’s decision last month to raise interest by 1% in a proactive step towards accelerating inflation, and secondly, the US Federal Reserve’s decision to stabilize interest rates, which is what drives many countries emerging markets, including Egypt, to stabilize interest rates. Third, inflation is expected to accelerate in Egypt during the first quarter of next year as a result of implementing the reforms related to the IMF agreement, and therefore the Central Bank needs to save some ammunition for the end of the year.
It is worth noting that the Monetary Policy Committee at the Egyptian Central Bank decided in its last meeting last month to raise interest rates on overnight deposits and lending by 100 basis points to 19.25% and 20.25%, respectively, with a total increase of 300 basis points since the beginning of the year and 800 points. Basis through 2022.
Editing the price of the Egyptian pound
Genena continued: “I believe that liberalizing the exchange rate of the Egyptian pound will be implemented in the first quarter of next year after the completion of the presidential elections scheduled for next December… Liberalizing the exchange rate will take place before the third review of the IMF scheduled for March 2023, while the first review The second has not been completed yet.”
The chief economist and market strategist at Cairo Capital Securities explained that the first quarter of next year is a good window to implement these measures before the third IMF review and thus obtain the scheduled financing from the fund from other partners.
He stated that the size of the expected decline of the Egyptian pound against the dollar according to fair value rates is expected to range between 35-40 pounds, or at levels of 37-38 pounds.
“If there is a complete liberalization of the exchange rate of the pound, we may initially see a fluctuation in the exchange rate and then a decline to levels of 37-38 pounds to the dollar during the next year,” according to Genena.
He pointed out that inflation will reach its peak in the first quarter of 2024 to levels between 45-50% for several reasons, the most prominent of which is moving the price of administratively determined commodities, including electricity and fuel, and after the special procedures of the Ministry of Finance, as well as the flexibility of the exchange rate, and also other factors, including high liquidity growth, adding: “Inflation levels in Egypt will reach about 45-50% before they begin to decline in mid-2024.”
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