While the Central Bank of Egypt unexpectedly raised interest rates on Thursda by 100 basis points (bps) to 19.25%, it still needs to do more in terms of rate hikes and devaluation, said Capital Economics in a note on Friday. The rate hike this week comes after Egypt's inflation hit an annual 35.7% in June. Capital Economics said the CBE appeared to be managing the pound by rationing foreign currency but there are signs that this is now starting to disrupt economic activity. And crucially it will need to show a credible commitment to a more flexible exchange rate regime." "We have tweaked our interest rate forecast and expect a 200bp hike, to 21.25%, to come alongside a devaluation at some point in the coming months."

Source: The North Africa Journal August 05, 2023 00:01 UTC