Alia Moubayed, chief economist at Jefferies International, expected the Central Bank of Egypt to fix interest rates at its meeting, today, Thursday.
In an interview with Al-Arabiya, Alia Moubayed said that the division in expectations regarding the bank’s decision reflects the difference between what is expected and what must be done within monetary policies that curb inflation and contribute to a way out of the current crisis in Egypt.
She explained that, therefore, the Central Bank of Egypt must raise interest rates because real returns are negative, and not raising it will not help reduce inflation and attract investments to the pound.
And the chief economist at Jefferies International attributed the possible direction of the Central Bank of Egypt to its thinking about its previous large hike in interest rates, while it did not see results, and that it believes that inflation does not reflect demand, but reflects problems with supply, and that “I do not agree with it.”
Alia Moubayed said that only raising the interest rate will not benefit without a basket of measures in terms of liberalizing the pound and sharpening financing through selling some assets and agreeing with the IMF, because the Central Bank of Egypt needs an arsenal of dollar liquidity in order to make the interest rate hike have a positive impact on the pound and dollar flows. On the other hand, therefore, it is waiting for the scene of the tools affecting monetary policy to be completed.
And she continued, “This does not mean relying solely on raising interest, which is costly to the Ministry of Finance and the debt dynamic that has become dangerous, and it may resort to increasing the compulsory reserve for banks.”
Regarding the performance of Egyptian bonds, Alia Moubayed said that Egyptian bonds are trading at a low level in light of a negative feeling towards economies that have high debts and large financing gaps, such as Egypt, and in light of the continuation of interest rates and the exchange rate with investors’ interest in buying short-term bonds that are expected not to default. interest in lower-priced bonds.
She added that investors prefer bonds with maturities of 10 years instead of 30 years.