Egypt central bank forecast to raise interest rates by 150 bps

People walk in front of the Central Bank of Egypt's headquarters at downtown Cairo
People walk in front of the Central Bank of Egypt's headquarters at downtown Cairo, Egypt, November 3, 2016. REUTERS/Mohamed Abd El Ghany//File Photo

CAIRO, Jan 30 (Reuters) - The Central Bank of Egypt (CBE) is expected to hike its overnight interest rates by 150 basis points on Thursday as it keeps battling inflation after a series of currency devaluations, a Reuters poll showed on Monday.

The median forecast in a poll of 13 analysts is for the bank to increase its deposit rate to 17.75% and its lending rate to 18.75% at its regular monetary policy committee (MPC) meeting.

The central bank raised rates by a larger-than-expected 300 bps at its last meeting on Dec. 22 and by 200 bps at a surprise meeting on Oct. 27, when it also announced a staff-level agreement with the International Monetary Fund for a $3 billion financial rescue package.

Egypt requested the package soon after Russia invaded Ukraine a year ago, triggering a crisis in Egypt that bit into its tourism sector, raised the bill for commodity imports and led foreign investors to pull more than $20 billion out of the local treasuries market.

"We expect the CBE to hike policy rates this Thursday by at least 100 bps, said Noaman Khaled, an economist with NBK. "We see it as important for the CBE to act before the inflation print comes out next week which we anticipate at around 23-24%."

Annual inflation jumped to a five-year high of 21.3% in December from 18.7% in November.

Likewise, Egypt has allowed its currency to depreciate by nearly 50% over the last year, with the official rate of the pound now at 30 to the dollar.

Despite the high inflation, some analysts believe the central bank will leave interest rates on hold.

"We expect the MPC to keep the policy rates unchanged to allow the market to absorb the 300 bps hike of the 22 December 2022 meeting," HC Securities said.

Foreign investors this month had begun returning to the Egyptian treasuries market, it added, lessening the urgency of raising interest rates to attract them.

Reporting by Patrick Werr; Editing by Hugh Lawson

Our Standards: The Thomson Reuters Trust Principles.