Dr. Mohamed Abdel-Wahhab, an economic analyst and financial advisor, expected the Central Bank of Egypt to fix interest rates on deposits and lending at the Monetary Policy Committee meeting tomorrow, Thursday, for the fourth time this year, after it raised them at the March meeting by 200 basis points, while it decided to keep them as they are during February, May and June meetings.
Abdel-Wahhab attributed this to the fact that high inflation rates currently depend on improving dollar liquidity and not raising interest, which the government is trying to provide by offering the two largest government banks in Egypt, Al-Ahly and Misr, for dollar certificates with a high return of 7 and 9%, in addition to the Egyptian Cabinet announcing the sale of Assets worth $1.65 billion in July, the revival of inbound tourism, the facilitation of selling land to foreign investors in dollars, and support for exporting products are all in the interest of increasing dollar flows and thus controlling inflation rates resulting from the rise in prices of some commodities, especially basic ones.
Abdel-Wahhab explained that the inflation rate rose for the second month in a row, recording 35.7% on an annual basis in June, up from 32.8% in May on an annual basis. According to data issued by the Central Agency for Public Mobilization and Statistics, monthly prices increased by 2.08% on a monthly basis in June, compared to 2.72% in the previous month. It was driven by a shortage of some commodities and production inputs as a result of the tightening of import operations and the weak availability of the dollar in the market.
Dr. Mohamed Abdel-Wahhab stressed that the rise in domestic liquidity in the banking sector to 8.248 trillion pounds at the end of June 2023 compared to 7.402 trillion pounds at the end of December 2022, an increase of 845.4 billion pounds, is also not justified for raising interest, but it may push banks to issue high-yield certificates to reduce the volume Liquidity in an attempt to control high inflation rates, especially after the negative effects that resulted from the disbursement of the 18% certificates return that went to the gold market and led to its unreasonable rise due to the increase in demand with the lack of supply, but the government was able to contain the crisis after the cabinet’s decision to allow entry Gold bars with returnees from abroad, which almost restored the market to its normal levels, which calls on the government to control the amount of liquidity in the market in order to avoid the occurrence of new crises, and it has actually succeeded in that with the issuance of 18 and 25% certificates.
The economist ruled out that the Central Bank of Egypt would follow the US Federal Reserve in raising interest, after the latter raised it by 25 basis points last Wednesday, to reach the range of 5.25-5.50%, i.e. a total increase of 100 basis points since the beginning of the year to date and 425 basis points in 2022. Of course, the situation is very different.
It is worth noting that the Monetary Policy Committee of the Central Bank of Egypt, in its previous meeting held on June 22, maintained the rates of the overnight deposit and lending return and the price of the main operation of the Central Bank at the level of 18.25%, 19.25% and 18.75%, respectively. credit and discount rate at the level of 18.75%; This is for the fourth time this year, after the interest rate was raised by 200 basis points on March 30, which is the total value of the hike since the beginning of the year until now, after a total interest rate hike of 800 basis points over the course of 2022.
