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The Central Bank of Egypt (CBE) will raise its overnight interest rates by 200 basis points on Thursday as it tries to quell soaring inflation after a sharp devaluation of the currency, a Reuters poll predicted on Tuesday.
The median forecast in a poll of 12 analysts is for the bank to raise its deposit rate to 15.25 per cent and its lending rate to 16.25 per cent at its regular monetary policy committee meeting.
The central bank raised rates by 200 bps at a surprise meeting on October 27. On the same day, it allowed the currency to weaken by 14.5 per cent and announced it had reached a staff-level agreement on a $3 billion financial support package with the International Monetary Fund.
Despite the devaluation, the gap between the official and black market rates against the dollar has continued to widen, with one dollar fetching about 24.70 pounds at banks and as much as 33 on the black market. The official rate was 19.7 before the October devaluation.
Some analysts expected a smaller rate hike.
“In the absence of a move on the FX, we project CBE to hike rates by 100bps in an effort to signal continued monetary tightening amidst rising inflation expectations,” said Mohamed Abu Basha of EFG Hermes.
Egypt’s headline inflation surged to a five-year high of 18.7 per cent in November from 16.2 per cent in October.
“With inflation having risen more than expected, we now expect the CBE to raise policy rates by a further 100bps,” said Jacques Verreynne of Oxford Economics.
The central bank said after its last meeting that prices would continue to exceed its inflation target range of 5-9 per cent during the fourth quarter. — Reuters
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