Egypt seen holding interest rates steady on Thursday: Reuters poll

CAIRO (Reuters) – Egypt’s central bank is expected to keep its overnight interest rates steady at a policy meeting on Thursday, as the government targets stability ahead of a presidential election scheduled for December and amid the ongoing crisis in Gaza.

The median forecast in a poll of 16 analysts is for the bank to hold its deposit rate steady at 19.25% and its lending rate at 20.25% when its regular monetary policy committee (MPC) meets. Three analysts expected the bank to hike rates by 100 basis points (bps).

The central bank for months has been reluctant to allow any change in currency or interest rates. Since March, it has kept the Egyptian pound fixed at 30.95 to the dollar and raised the overnight interest rate by only 100 basis points despite inflation surging to an all-time high of 38% in September.

Carla Slim of Standard Chartered said she expected the “CBE to extend a pause on both FX and rates adjustments until a likely augmented IMF programme is finalised.”

In a $3 billion financial support package signed with the International Monetary Fund in December, Egypt agreed to let its currency float freely and to speed up the sale of state assets to narrow its budget and current account deficits. Progress on both counts has been slow.

The IMF was due to disburse funds twice a year over 46 months, but delayed the June payment amid reports it was unhappy with Egypt’s progress.

Many analysts believe Egypt is waiting until after the election before loosening its currency, which on the black market trades at about 45 to the dollar, and is likely to seek an increase in the size of the IMF package.

“We expect to see a large rate hike at the time of the next devaluation, following the presidential election,” said ADCB economist Monica Malik. “At this point, we see the focus on reducing pressures on households.”

President Abdel Fattah al-Sisi has announced he will run for a third term in the Dec. 10-12 election. He won elections in 2014 and 2018 with 97% of the vote.

(Reporting by Patrick Werr; editing by Jonathan Oatis)