The Art of Dovishness
KEY THEMES
It’s interest rate week! The CBE’s Monetary Policy Committee (MPC) meets this Thursday, 17 June, in its fourth meeting in 2021 to decide on EGP interest rates. As we have seen in the first three meetings so far in the year, we envisage that the MPC will keep rates on hold. As a reminder, the policy rates current stand at 8.25% for overnight deposit and 9.25% for overnight lending. Meanwhile, both the main operation and the discount rates stand at 8.75% each. In our inflation note published last Thursday, our Chief Economist Mona Bedeir said that May inflation, albeit higher vs. April, was still within the CBE’s target of 7% ± 2%. She thinks the CBE needed to get a clearer picture of (1) the trajectory of global commodity prices and their impact on domestic inflation and (2) the U.S. inflation outlook and its impact on the Fed’s monetary stance. Indeed, the Fed will meet on Tuesday and Wednesday to decide USD interest rates and is likely to maintain its target at 0.00-0.25%.