Egypt’s record inflation likely to precipitate in interest rate hike

Egypt’s record inflation likely to precipitate in interest rate hike

With urban inflation reaching a new record high of nearly 36%, Egypt’s policymakers are expected to carry on with fiscal tightening policies amid expectations of a new stint of currency devaluation, Capital Economics said on Monday. Annual urban consumer price inflation has risen to a record 35.7% year-on-year in June from 32.7% in May, Egypt’s Central Agency for Public Mobilization and Statistics said in a statement issued on Monday. The annual nationwide inflation rate has jumped to 36.8% from 14.5% in the same month last year, according to the same statement. The jump was primarily driven by food and beverages, whose prices had increased by 64.9% year-on-year. “We expect that the Central Bank of Egypt will resume its tightening cycle in the comping months and hike interest rates by a further 200bp, taking the overnight deposit rate to 20.25 percent,” Capital Economics said in a note issued Monday. Earlier forecasts by the London-based think tank had penciled in the hike in September. However, recent inflation figures might force monetary policymakers to raise interest rates sooner, the note said expecting the CBE to adopt the hikes as early as August. Last month, the CBE decided to leave overnight interest rates for