Egyptian pound devaluation expected amid inflation concerns, interest rates rise: Capital Economics

Capital Economics projects that the Egyptian pound will depreciate to 35 per dollar by the close of 2023, marking a 12 percent devaluation from its current rate of 30.95 per dollar.

 

However, the report emphasizes that the risks are skewed towards the downside, clarifying that while the devaluation might not necessarily lead to increased inflation, it will maintain an elevated inflation environment.

 

In relation to the recent decision on interest rates, the report states that Egypt's central bank surprised the market by implementing an unexpected interest rate hike. This move has been positively embraced by investors as a signal that policymakers are returning to a more orthodox economic approach.

 

The sudden 100 basis point hike, raising the rates to 19.25 percent, took the majority of analysts, including Capital Economics, by surprise, as the consensus had anticipated rates to remain unchanged for a third consecutive meeting.