Anticipation builds for CBE decision on interest rates Thursday

The MPC’s decision might be influenced by the downward trajectory trend that the inflation rate has been going through in the past few months.

According to the Fitch Solutions report, the CBE is anticipated to hold the overnight deposit and lending interest rates through the second half of 2024 at 27.27 and 28.25 percent, respectively.

The CBE decided to keep the interest rates unchanged in its meeting in July, which marked the first meeting in the current FY2024/2025.

Inflationary pressures

 

“The CBE is facing a tough challenge in achieving balance amongst conflicting goals," economic and banking expert Hany Abul-Fotouh told Ahram Online.

"On the one hand, there are increasing pressures to ease the monetary policy to support the economic growth and the creation of job opportunities,” said Abul-Fotouh.

“On the other hand, there are serious concerns that the early easing of the monetary policy might lead to the escalation of the problem of the core inflation, which reached 24.4 percent annually in July," he added.

Abul-Fotouh also stated that the inflation rate remains high despite its downward trajectory, which decreases confidence in the local currency and decreases the purchasing power of citizens.

He highlighted the CBE has to consider the effect of this decision on foreign capital inflows as any significant easing of the monetary policy could lead to capital outflows, negatively influencing the Egyptian pound.

The economic expert also noted that the Egyptian economy is witnessing rising pressures amid expectations of inflation rise in August, mainly attributed to the successive rises in energy prices, including electricity and fuel.

He noted that energy prices play a pivotal role in deciding inflation rates as they affect calculating the production, transportation, and distribution costs of most goods and services.

Abul-Fotouh expected the MPC would keep the interest levels unchanged and carefully monitor local and global developments.

Meanwhile, Mohamed Hamouda, credit risk manager and finance and investment professor, told Ahram Online: “As long as inflation does not drop to targetted levels, the CBE will keep interest rates unchanged.”