BNP Paribas: CBE to increase interest rates by 200 bps

Analysts at BNP Paribas expect the Central Bank of Egypt (CBE) would hike interest rates by 200 basis points (bps) in an emergency meeting this week before the scheduled meeting on 19 May, according to a research note.

An official source at the CBE told the state-owned Middle East News Agency (MENA) that the Monetary Policy Committee will hold the meeting on 19 May as planned, mentioning that there is no intention to modify the meeting date.

The research note focused on the unanimity call as being on top of the 100bp rate hikes they already expecting in both CBE’s Monetary Policy Committee meetings in August and September.

“We now forecast hikes of 200 bps in May and 100 bps in both August and September, taking the policy rate to 13.25 percent by Q4, as we expect inflation to peak in Q3. This compares with our previous forecast of an end-2022 policy rate of 12.25 percent,” the note read.

This comes following the U.S. Federal Reserve decision on Wednesday to raise its benchmark interest rate by half a percentage point.

BNP Paribas says that the market view on the U.S. Fed has possibly become more feisty since the last EGP devaluation. As, the US implied policy rate now sitting at 2.835% by the December Federal Open Market Committee vs. 2.188 percent on 21 March.