HC expects the CBE to hike policy rates by 200 bps

HC expects the CBE to hike policy rates by 200 bps

- HC Securities & Investment shared their expectations on the likely outcome of the MPC meeting scheduled August 18th and based on Egypt’s current situation, they expect the CBE to hike policy rates by 200 bps.

Head of macro and financials at HC, Monette Doss commented: “ The July inflation figure came in higher than our estimate of 13.0% y-o-y, and we expect it to average 14.2% over the rest of the year, well above the CBE's inflation target of 7% (+/-2% for 4Q22). Looking at Egypt's external accounts, we believe that pressure is accumulating on the country's balance of payment (BoP), including (1) our FY21/22e current account deficit estimate of 4.8% of GDP, up from 4.6% a year earlier, (2) April remittances declining c7% m-o-m to USD3.1bn, (3) the banking sector's (excluding the CBE) net foreign liability position widening to USD11.5bn in June, (4) the drop in foreign currency deposits, not included in the official reserves, to USD0.89bn in July from USD11.2bn in December, (4) net international reserves settling at USD33.1bn representing 4.71 months of imports coverage, and (5) Egypt's external debt repayment schedule showing dues (excluding GCC deposits) of USD12.1bn over FY22/23. Against this backdrop, we believe a 200