The pound versus the dollar… What happens after the Central Bank’s decision to fix interest rates?

The pound versus the dollar… What happens after the Central Bank’s decision to fix interest rates?
The pound versus the dollar… What happens after the Central Bank’s decision to fix interest rates?

Bankers and economists said that the Central Bank’s decision to fix the interest rate will not affect the exchange rate of the pound at the present time, as the Central Bank is following a policy of gradual devaluation of the currency in light of internal and external pressures.

The Monetary Policy Committee of the Central Bank of Egypt decided, during its meeting today, Thursday, to maintain the interest rate on deposit and lending overnight for the third time in a row and for the fourth this year, to stabilize the price of the main currency at the level of 11.25%, 12.25% and 11.25%, respectively. The credit and discount rate were also kept at the level of 11.75%.

Gradual devaluation of the Egyptian pound

Hani Genena, an economist and lecturer at the American University, said that it is unlikely that there will be a current impact of raising the US interest rate on the price of the pound, pointing to the bank’s ability to absorb the pressure generated by such a decision before, but he expected a further decline in the price of the pound against the dollar in light of the pressures. External and internal, estimating the decline of the Egyptian currency to levels between 10-15% to record about 22-23 pounds to the dollar.

The dollar recorded 19.54 pounds, and the price of the Egyptian currency is separated by only 3 piasters, to record its lowest levels ever, and the pound has fallen by 24% since its devaluation last March.

Geneina added that the current stage is difficult for Egypt, as it tends to reduce the price of the pound to the level of 2016, noting that the diversification of foreign exchange sources through the required International Monetary Fund loan, the strong recovery in the tourism sector and the government’s sale of stakes in major companies would help. In overcoming the crisis, according to Geneina’s statements.

The effect of a US interest rate hike

For her part, Sahar El-Damaty, a banking expert and former Vice President of Banque Misr, said that the central bank is currently working to reduce the exchange rate gradually, and therefore raising the US interest rate will not affect the pound at the present time, noting Egypt’s ability to absorb The shock of the exit of foreign indirect investments in debt instruments after the Russian-Ukrainian war.

The banking expert explained that the presence of certificates at a high interest rate next to the central policy in the exchange rate will limit the impact of raising the interest rate by the Fed, adding that the central bank aims to reach the real price of the pound against the dollar according to the studies developed and the target period on its part, taking into account all situations global and local economics.

The pound has fallen by 1.8% against the dollar since the appointment of Hassan Abdullah as acting central bank governor on March 18, following the resignation of Tarek Amer, on his way to recording its lowest level at 19.56 pounds to the dollar, in December 2016.

Yesterday, Wednesday, the US Federal Reserve raised the interest rate by 0.75%, for the fifth time in a row, in order to curb rising inflation, bringing the interest rate in the United States to a level between 3 and 3.25%.

Tags: pound dollar .. Central Banks decision fix interest rates

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