POLL-Egypt’s central bank to raise interest rates by 100 bps: Reuters Poll

CAIRO (Reuters) – Egypt’s central bank will raise its overnight deposit rate by 100 basis points (bps) on Thursday as it tries to dampen resurgent inflation, a Reuters poll forecast.

The median forecast in a poll of 15 analysts is for the bank to raise its deposit rate to 12.25% and its lending rate to 13.25% at its regular monetary policy committee meeting.

The committee will meet a day after a meeting of the Federal Reserve, which is expected to raise U.S. interest rates.

Egypt’s central bank kept its rates on hold at its last two meetings, on June 23 and August 18, but raised them by 200 bps in May, saying it was seeking to contain inflation expectations after prices surged by their fastest in three years.

“A continued rise in inflation and in parallel Egyptian pound weakness warrant further monetary tightening,” said Mohamed Abu Basha of EFG Hermes.

Egypt’s annual urban consumer inflation quickened to 14.6% year-on-year in August from 13.6% in July, while core inflation rose to 16.7% from 15.6%.

The central bank has an inflation target range of 5-9%, but in June said it would tolerate a higher level until after the fourth quarter.

Not all analysts expect a rate hike.

Wael Ziada of Zilla Holding said most of the economic shock to Egypt has been external and has already been reflected in the domestic inflation rate. Any interest rate increase would have little effect on inflation.

“External variables with regard to oil prices and the food price index may indicate that the worst in terms of importing inflation has passed,” he said.

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