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Poll: The Central Bank of Egypt raises interest rates by 100 basis points

CAIRO (Reuters) – A Reuters poll expected the Central Bank of Egypt to raise its overnight deposit rate by 100 basis points on Thursday as it tries to rein in spiraling inflation.

The median expectation in a poll of 15 analysts was that the bank would raise the deposit rate to 12.25% and the lending rate to 13.25% at the regular MPC meeting.

The committee will meet a day after the Federal Reserve, which is expected to raise US interest rates.

The Central Bank of Egypt kept interest rates unchanged in its last two meetings, on June 23 and August 18, but raised them by 200 basis points in May, saying that it seeks to contain inflation expectations after prices jumped as quickly as possible in three years.

“The continued rise in inflation and the weakness of the Egyptian pound in parallel calls for more monetary tightening,” said Mohamed Abu Basha of EFG Hermes.

Annual consumer price inflation rates in cities in Egypt accelerated to 14.6% y/y in August from 13.6% in July, while core inflation rose to 16.7% from 15.6%.

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

Not all analysts expect a rate hike.

Wael Ziada from Zilla Holding said that most of the economic shocks that Egypt has experienced were external and have already been reflected in the domestic inflation rate. Any increase in the interest rate will have little effect on inflation.

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

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