A rate hike is an urgent measure on the backdrop of moves taken by central banks worldwide to contain inflation, especially after the Federal Open Market Committee (FOMC) raised interest rates by 0.5 per cent last week.
The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) is scheduled to meet on May 19.
However, an emergency meeting seems to be imminentwith the US dollar strengthening to decades-highs. The MPC may raise rates by one per cent.
A higher interest rate in the US has alreadystrengthened the greenback globally, invigorating the dollar versus the world’s major currencies.
A global foreign exchange war has started and no one can predict the consequences on world trade, commodities prices, and markets in general.
The greenback currently sells for LE18.5, according to CBE data.
Central banks in Saudi Arabia, the United Arab Emirates, Kuwait, Bahrain and Qatar raised interest on Wednesday in line with the Fed’s move to contain inflation. Saudi, UAE, Qatari and Bahraini central banks increased rates by 50 basis points, while Kuwait raised rates by 25 basis points as of May 5.
The MPC is expected to take countermeasures action against inflation, which has been fueling since the eruption of the Russia-Ukraine conflict in February.
The state-run Central Agency for Public Mobilisationand Statistics (CAPMAS) is due to announce April inflation rate this week.
Urban inflation rose to 12.1 per cent in March, compared to 4.8 per cent a month earlier, according to CAPMAS data.
The MPC raised rates by one per cent on March 21 in an attempt to absorb shocks from hiking global inflation rates caused by the supply chain crisis and the repercussions of the Russia-Ukraine conflict.
The overnight deposit and lending rates currently stand at 9.25 and 10.25 per cent, respectively, according to CBE data.
The monetary policy’s main challenge will be maintaining a stabilized foreign exchange rate to boost the local business climate and lure more inflows of foreign investment.
Following the US rate hike, Fed Chair Jerome Powell made it clear that the benchmark interest rate would be lifted further this year, citing spiraling inflation.
“We are on a path to move our policy rate expeditiously to more normal levels. Assuming that economic and financial conditions evolve in line with expectations, there is a broad sense on the Committee that additional 50 basis point increases should be on the table at the next couple of meetings,” Powell said.
“We will make our decisions meeting by meeting, as we learn from incoming data and the evolving outlook for the economy. And we will continue to communicate our thinking as clearly as possible. Our overarching focus is using our tools to bring inflation back down to our two per cent goal,” he added.
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