CBE expected to raise interest rates by up to 300 bps in March: Goldman Sachs

CBE expected to raise interest rates by up to 300 bps in March: Goldman Sachs

Goldman Sachs expects the Central Bank of Egypt to raise interest rates by up to 300 basis points in its March meeting.

Bloomberg said that the Central Bank of Egypt will take this decision after inflation in February far exceeded expectations.

The interest rate hike of this magnitude was a recent precedent in Egypt, as it was also forced to devalue its currency three times over the past year.

The Central Bank of Egypt raised the interest rates on deposits by 300 basis points, the highest rate since 2016, to 16.25 percent in December 2022, and has maintained it since then.

Regarding inflation expectations and in particular, improving local foreign exchange liquidity to relieve chronic pressure on the Egyptian pound will require the Central Bank of Egypt to pursue a more tightened monetary policy in the coming months, Farouk Sousse, an economist at Goldman Sachs in London, said.

Goldman Sachs has previously said it does not rule out an unscheduled increase in interest rates in response to pressure on inflation and the pound.

After the latest inflation data, economists at Cairo-based NAEEM Brokerage firm said an emergency meeting could precede an increase of 200-300 basis points.

The fastest rise in inflation in more than five years has