Urgent – a new meeting of the Central Bank to discuss interest rates.. “Al-Fajr” publishes the details

A state of anticipation towards what the decision intends Monetary Policy Committee with the Central Bank of Egypt; This is in order to decide the fate of the interest rate, when it holds its meeting today, Thursday, August 3, between raising and fixing.

has been announced Egyptian Central Bank The meeting of its Monetary Policy Committee, in its fourth meeting this year, Amid expectations of keeping interest rates unchanged, due to the lack of abundant hard currency liquidity in the country.

In this report, Al-Fajr portal reviews the most important expectations and details about what is expected from the Monetary Policy Committee at its meeting today.

The Egyptian pound.. huge local liquidity within the Central Bank

A few days ago it was revealed Egyptian Central Bankon the increase 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.

In a recent report, the bank revealed an increase in the money supply, recording 2.060 trillion pounds, compared to 1.739 trillion pounds at the end of last December.

Supports fixation.. Experts’ expectations about the Central Bank meeting to discuss interest rates today, Thursday

In his opinion, Dr. Mohamed Abdel-Wahhab, an economic analyst and financial advisor, indicates a high probability that the Central Bank of Egypt will fix interest rates on deposits and lending at the Monetary Policy Committee meeting today, Thursday, for the fourth time this year, after raising them at the March meeting by 200 basis points, while He decided to keep it as it is during the February, May and June meetings.

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The economic analyst and financial advisor attributed this to the high inflation rates, which 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 announcement of the Egyptian Cabinet. The sale of assets worth $1.65 billion in July, the revival of incoming tourism, the facilitation of selling lands to foreign investors in dollars, and the 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.

Dr. Mohamed Abdel-Wahhab explained: Inflation rates 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.

Domestic liquidity is not a justification for raising interest

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.

Here, economic analyzes rule out following the Central Bank of Egypt and the US Federal Reserve in raising interest rates, 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.

Another opinion, but the least.. The bank will raise the interest rate

The committee consisting of it is indicated that it kept the interest rate at 18.25%, in its meeting held on June 22, and its decision was to keep the rates of the deposit and lending return for one night and the rate of the main operation of the Central Bank at the level of 18.25%, 19.25% and 18.75%, respectively. And that after raising it in March by 200 basis points for the first time during the current year.

Despite the foregoing, however, some believe that the Central Bank may be heading towards raising the interest rate, based on:

1. The US Central Bank raised interest rates at its meeting a few days ago by 25 basis points to a range of 5.25% – 5.5%.
2. The whole process coincides with the meetings of the major banks in the world and their announcement of the decision to raise interest rates by a quarter of a percentage point.

The secret is in monetary policy and central bank targets

There is an expectation that the interest rate will be raised to about 1% – 3%, as some experts believe that the monetary policy that raised the interest was based on strict measures that bore some fruit by restricting liquidity rates in the market and rationalizing consumption in general, in addition to the current inflation rates. It far exceeds the ambitious targets of the Central Bank announced before the end of last year at 7% (±2%) on average during the fourth quarter of 2024, targeting a decline to 5% (±2%) on average during the fourth quarter of 2026.

So what happens?

The bet lies on raising or fixing the interest rate, through two well-known factors in the Egyptian financial and economic market:

The first is the greed of merchants: the non-reduction of inflation, i.e. the drop in prices, is due to two factors. The first is the greed of some merchants and the difficulty of setting compulsory pricing. The other factor is the pricing of commodities at the price of the dollar in the parallel market, not the banks, according to Badra.

The second is the price of the dollar on the black market: Despite the decline in the price of the dollar on the black market during the last week, it is still higher by 4 to LE than the official rate in banks, to circulate between currency dealers between 35 and 38 pounds, compared to 30.95 pounds in the banking system, according to exchange market observers he spoke to. Masrawy earlier.