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Post-float reactions: Almost a week later, the aftermath of the EGP float and 600 bps rate hike is still unfolding.
ANOTHER RATE HIKE-
Two rate hikes in a single month? JPMorgan sees the CBE hiking interest rates by a further 200 bps when it meets on 28 March to clamp on soaring inflation spurred by the recent float of the EGP, according to a note seen by Reuters. The central bank hiked interest rates by 600 bps at a surprise monetary policy meeting last week, leaving the deposit and lending rates at 27.25% and 28.25%, respectively.
Remember: Egypt’s annual headline inflation defied expectations and jumped 5.9 percentage points to 35.7% in February, after easing for four consecutive months.
Don’t expect cuts anytime soon: JPMorgan doesn’t expect the central bank to move forward with any rate cuts before February 2025.
EGX UP-
EGX30 up 12% since day of the float: After rising as much as 5% in intraday trading following the central bank’s announcement that it would float the EGP on Wednesday, the country’s benchmark index finished the day 3.0% down. Since then, the EGX30 has risen 12.2% over just three days of trading and is up 34.1% YTD.
We’re expecting more foreign investors to pour funds into the bourse after the float made the EGX30 much more attractive in USD terms.
“Confidence in the foreign exchange liquidity situation is seen improving slowly” and there are early signs this sentiment is attracting foreign investors back, Naeem Brokerage’s Allen Sandeep told Bloomberg.
CIB EASES FX LIMITS-
CIB eases FX transaction limits abroad for the second time in less than a week: The CIB has raised the monthly maximum cap on FX transactions abroad to the equivalent of EGP 75k-200k depending on the account type, up from EGP 25k-175k, according to a statement (pdf) from the lender. Egyptians abroad can now also withdraw the equivalent of EGP 3.5k-10.5k from ATMs abroad every month, up from EGP 2k-6.5k.
There’s also good news for CIB customers wanting to renew their online subscriptions: The bank also increased the monthly ceiling on FX transactions at home to EGP 50k for all account types, up from EGP 3.5k-12.5k.
The move follows another loosening of FX transactions the bank and others had made over the weekend, following instructions from the central bank to gradually lift restrictions on credit card FX transactions as the country adjusts to a new post-float normal and waves goodbye to the parallel market and FX shortages.
CORRECTION: In yesterday’s issue of EnterpriseAM Egypt, we mistakenly reported that the CBE auctioned off three-year t-bonds worth EGP 28 mn on Sunday. The auction cited was from 2023.
