After a nine-day holiday due to Eid El-Fitr and Labour Day celebrations, Egypt’s banking sector resumed work on Sunday amid calm as the Egyptian pound remained stable despite the US Federal Reserves’ recent decision to raise interest rates.
The Central Bank of Egypt’s (CBE) Egyptian pound trading price against the US dollar was stable on Sunday, as buying and selling prices stood at the same level prior to Eid holiday at EGP 18.44 and EGP 18.52, respectively, by the day close.
The CBE has not announced any fresh procedures to deal with the US Federal Reserves’ recent decision to raise interest rates.
However, the MPC is convening on 19 May to review the CBE’s key interest rates – for the third time in 2022 and for the second time since the onset of the war in Ukraine.
In national and private banks, the pound’s price averaged EGP 18.44 for buying and EGP 18.54 for selling.
Last Wednesday, in an effort to curb inflationary pressures, the US Federal Reserve raised its benchmark interest rates by 0.5 percent (50 bps), which is the highest increase applied since 2000, noting that it would introduce another rise in the upcoming meeting by 0.5 percent as well with an objective to reach 2.8 percent rise in interest rates through end of 2022.
On Saturday, BNP Paribas expected that the MPC would hold an unscheduled meeting prior to the scheduled meeting in May to raise interest rates up to two percent (200 bps), forecasting the Egyptian pound to further weaken over the coming few weeks. It also predicted that the US Federal Reserves’ tighter policy will affect Egypt’s local-currency debt market negatively.
However, a CBE official affirmed on Saturday that the MPC will meet on its scheduled date, adding that there is no need to convene before 19 May.
Amid the multifaceted crisis; including the war in Ukraine, rising food and energy prices, supply chains disruption and the already existing impacts of the pandemic, the CBE hiked its key interest rates in an unscheduled meeting held in March by one percent for the first time since 2017 as well as devaluating the Egyptian pound by 14 percent in a bid to curb investment outflows and contain the implications of the inflationary wave.
The BNP Paribas’ report said that Egypt’s anticipated loan deal with the International Monetary Fund (IMF) is expected to bolster the country’s economy amid the ongoing challenges, projecting its sum to reach $10 billion under the Fund’s Extended Fund Facility (EFF) instrument.
EFF is the same programme under which Egypt secured a $12 billion loan in 2016 to execute its three-year economic reform programme, which end in July 2019.
