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Egypt central bank may hike interest rates to tame inflation

REUTERS/Mohamed Abd El Ghany
FILE PHOTO: People walk in front of the Central Bank of Egypt's headquarters at downtown Cairo, Egypt, November 3, 2016.

Egypt’s central bank (CBE) is forecast to hike its overnight interest rates by 200 basis points (bps) on Thursday as it struggles to bring soaring inflation under control, a Reuters poll showed on Monday.

After that meeting, the state statistics agency announced that annual inflation in January had surged to 25.8 percent and in February to 31.9 percent, its highest in five and a half years. February core inflation rose to an all-time high of 40.26 percent.

“The surprise pause undertaken by the CBE in February was widely considered a mistake,” said Monica Malik of ADCB. “This raised further concerns around the credibility of central bank policy.”

The central bank had raised rates by a total of 800 bps since Russia invaded Ukraine in early 2022.

The invasion triggered a crisis that bit into tourism, raised the bill for commodity imports and led foreign investors to pull more than $20 billion out of the local treasuries market. Since then, the currency has fallen by half against the dollar.

“With inflation surging and growing concerns over the commitment to orthodox policymaking, the CBE needs to deliver an aggressive rate hike to restore investors’ faith,” James Swanston of Capital Economics wrote in a note.