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Egypt Central Bank Expected to Leave Interest Rates Unchanged

Egypt’s central bank is likely to leave its overnight interest rates on hold. (AFP)
Egypt’s central bank is likely to leave its overnight interest rates on hold. (AFP)
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Egypt Central Bank Expected to Leave Interest Rates Unchanged

Egypt’s central bank is likely to leave its overnight interest rates on hold. (AFP)
Egypt’s central bank is likely to leave its overnight interest rates on hold. (AFP)

Egypt’s central bank is likely to leave its overnight interest rates on hold on Thursday, a Reuters poll showed, as inflation remained below target and growth appeared to be picking up.

Of 16 analysts polled, 15 believed the Central Bank of Egypt (CBE) would leave rates unchanged at its regular monetary policy committee meeting. One predicted a cut of 50 basis points (bps).

The central bank slashed its benchmark rate by 300 bps last March and another 50 bps each in September and November.

The overnight lending rate is now 9.25 percent and the overnight deposit rate 8.25 percent, their lowest since July 2014.

“February’s low inflation outturn supports a rate cut, but recent global market jitters between rising commodity prices and higher global interest rates are likely to push the CBE to maintain rates on hold,” said Mohamed Abu Basha of EFG Hermes.

Urban consumer price inflation accelerated to 4.5 percent in February from 4.3 percent in January, still below the five percent to nine percent target range set by the central bank in December.

“Despite inflation remaining weak at the start of the year, we expect the headline inflation rate to increase in the coming months,” said James Swanston of Capital Economics.

The economy grew by an annualized 1.35 percent in the last half of 2020 and by two percent in the final quarter, Planning Minister Hala al-Saeed said on Wednesday.

She expected it to grow by 2.8 percent in the first quarter of 2021 and 5.3 percent in the second quarter.

On Monday, the CBE said remittances from Egyptians working abroad rose 10.5 percent year-on-year to $29.6 billion in 2020.

Remittances during the final quarter of the year stood at about $7.5 billion, up from about $7 billion the previous year, it added.

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Firm Dollar Keeps Pound, Euro and Yen Under Pressure

US Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/ File Photo
US Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/ File Photo
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Firm Dollar Keeps Pound, Euro and Yen Under Pressure

US Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/ File Photo
US Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/ File Photo

The US dollar charged ahead on Thursday, underpinned by rising Treasury yields, putting the yen, sterling and euro under pressure near multi-month lows amid the shifting threat of tariffs.

The focus for markets in 2025 has been on US President-elect Donald Trump's agenda as he steps back into the White House on Jan. 20, with analysts expecting his policies to both bolster growth and add to price pressures, according to Reuters.

CNN on Wednesday reported that Trump is considering declaring a national economic emergency to provide legal justification for a series of universal tariffs on allies and adversaries. On Monday, the Washington Post said Trump was looking at more nuanced tariffs, which he later denied.

Concerns that policies introduced by the Trump administration could reignite inflation has led bond yields higher, with the yield on the benchmark 10-year US Treasury note hitting 4.73% on Wednesday, its highest since April 25. It was at 4.6709% on Thursday.

"Trump's shifting narrative on tariffs has undoubtedly had an effect on USD. It seems this capriciousness is something markets will have to adapt to over the coming four years," said Kieran Williams, head of Asia FX at InTouch Capital Markets.

The bond market selloff has left the dollar standing tall and casting a shadow on the currency market.

Among the most affected was the pound, which was headed for its biggest three-day drop in nearly two years.

Sterling slid to $1.2239 on Thursday, its weakest since November 2023, even as British government bond yields hit multi-year highs.

Ordinarily, higher gilt yields would support the pound, but not in this case.

The sell-off in UK government bond markets resumed on Thursday, with 10-year and 30-year gilt yields jumping again in early trading, as confidence in Britain's fiscal outlook deteriorates.

"Such a simultaneous sell-off in currency and bonds is rather unusual for a G10 country," said Michael Pfister, FX analyst at Commerzbank.

"It seems to be the culmination of a development that began several months ago. The new Labour government's approval ratings are at record lows just a few months after the election, and business and consumer sentiment is severely depressed."

Sterling was last down about 0.69% at $1.2282.

The euro also eased, albeit less than the pound, to $1.0302, lurking close to the two-year low it hit last week as investors remain worried the single currency may fall to the key $1 mark this year due to tariff uncertainties.

The yen hovered near the key 160 per dollar mark that led to Tokyo intervening in the market last July, after it touched a near six-month low of 158.55 on Wednesday.

Though it strengthened a bit on the day and was last at 158.15 per dollar. That all left the dollar index, which measures the US currency against six other units, up 0.15% and at 109.18, just shy of the two-year high it touched last week.

Also in the mix were the Federal Reserve minutes of its December meeting, released on Wednesday, which showed the central bank flagged new inflation concerns and officials saw a rising risk the incoming administration's plans may slow economic growth and raise unemployment.

With US markets closed on Thursday, the spotlight will be on Friday's payrolls report as investors parse through data to gauge when the Fed will next cut rates.