Egypt raises interest rates by 600 bps, pound tumbles
Egypt raises interest rates by 600 bps, pound tumbles/node/2471996/business-economy
Egypt raises interest rates by 600 bps, pound tumbles
Egypt’s pound fell sharply against the dollar as the markets opened, tumbling past 40 pounds to the dollar from about 30.85 pounds previously. Shutterstock
Egypt raises interest rates by 600 bps, pound tumbles
Updated 06 March 2024
Reuters
CAIRO: Egypt’s central bank said on Wednesday that it had hiked interest rates by 600 basis points at an unscheduled meeting and that it would allow the exchange rate to be set by market forces as it shifted to an inflation targeting regime.
Egypt’s pound fell sharply against the dollar as the markets opened, tumbling past 40 pounds to the dollar from about 30.85 pounds previously.
The country’s international bonds soared, with longer-dated bonds enjoyed the biggest gains, with the 2047 bond enjoying the biggest gains, up 2.6 cents at 82.3 cents, Tradeweb data showed.
The premium demanded by investors to hold Egypt’s international bonds over safe-haven US Treasuries tightened to 534 basis points, its lowest level since June 2021, according to data from JPMorgan.
The central bank announced that it had raised the overnight lending rate to 28.25 percent and its overnight deposit rate to 27.25 percent, as part of a decision to accelerate monetary tightening and ensure a decline in underlying inflation.
“To ensure a smooth transition, the CBE will continue to target inflation as its nominal anchor, allowing the exchange rate to be determined by market forces,” the central bank said in a statement.
“The unification of the exchange rate is crucial, as it facilitates the elimination of foreign exchange backlogs,” it said.
While the central bank has had an inflation target until now, it also sought to manage the pound, which has been fixed at 30.85 to the dollar over the past year as the central bank has sought to defend its value amid a chronic shortage of foreign currency.
In late February, the government signed a major investment deal with the UAE that eased pressure on the Egyptian pound on the black market.
US pump prices surge as Iran war upends global energy supply
Fuel prices jump over 10 percent as oil prices surge
Analysts predict further price rises due to market conditions
Updated 13 sec ago
REUTERS:
MARIETTA/NEW YORK : US retail gasoline and diesel prices are soaring as the US-Israel war with Iran constrains oil and fuel exports, which could be a political test for President Donald Trump’s Republican Party ahead of midterm elections in November. Fuel prices jumped more than 10 percent this week as oil rose above $90 a barrel, its highest in years, adding pain at the pump for consumers already strained by inflation. Trump on Thursday shrugged off higher gasoline prices in an interview with Reuters, saying “if they rise, they rise.” The president had vowed to lower energy prices and unleash US oil and gas drilling during his second term, but much of his tenure has been marked by volatility and uncertainty amid shifts in policies like tariffs and geopolitical turmoil. The US is the world’s largest oil producer. It is a major exporter but also imports millions of barrels a day since it is the world’s largest oil consumer. As of Friday, the national average prices for regular gasoline stood at $3.32 a gallon, up 11 percent from a week ago and the highest since September 2024, according to data from the motorists association AAA. Diesel was at $4.33, up 15 percent from a week ago, surging to the highest since November 2023.
Midwest, south feel the pince US motorists in parts of the Midwest and the South, including states that supported Trump, have seen some of the steepest increases in fuel costs since the conflict in Iran started. In Georgia, a swing state, average retail gasoline prices rose 40.1 cents a gallon over the past week, according to fuel tracking site GasBuddy. Andrenna McDaniel, a health care insurance worker in South Fulton, Georgia, said she was surprised to see prices skyrocket overnight. “They jumped up so quickly,” she said on Friday, adding that she does not agree with the war at all. McDaniel, a Democrat, said that for now she is only driving for the most important things, and feels lucky that she works from home so she does not have to drive as much as other people do. Georgia voted for Donald Trump in the 2024 election. Trump voter Richard Soule, 69, a US Air Force veteran and a retired firefighter, said a little pain at the pump is worth Trump’s efforts to protect America. “When President Trump went in there and bombed out their nuclear, and they just thumbed their nose at it, I believe he did the right thing at the right time,” Soule said on Friday as he filled up his Ford F-150 truck in Marietta, Georgia. Other states, including Indiana and West Virginia have seen prices rise by 44.3 cents and 43.9 cents, respectively.
Prices may rise further More pain may be on the way, analysts said, as oil prices continue to trend upward. On Friday, US oil futures settled at $90.90 a barrel, up nearly $10 and the biggest single-day rise since April 2020. “Given current market conditions, the national average price of gasoline could climb toward $3.50 to $3.70 per gallon in the coming days if oil continues rising and supply disruptions persist,” GasBuddy analyst Patrick De Haan said. The disruptions in the Middle East and the Strait of Hormuz, a key trade conduit, have boosted demand for US oil abroad, which in turn has driven up prices for domestic refiners too. “The US has weaned itself off of its dependence on Middle Eastern crude, but obviously Asian refineries, and to a lesser extent, European refineries have not,” Denton Cinquegrana, chief oil analyst with OPIS. “That’s what you’re seeing happen in the spot market, because the demand for US exports rise, and so the price rise.” Seasonal factors could add further pressure. Gasoline prices typically go up in the spring and peak in the summer due to higher gasoline demand and production of summer-blend gasoline, which is more costly to produce. Diesel fuel saw an even more aggressive jump since Iran began retaliating against US and Israeli strikes, significantly disrupting shipping in the Strait of Hormuz. Global diesel inventories have remained in tight supply due to heavy demand for heating and power generation during a prolonged winter in the US and other parts of the world and a structural tightness of refining capacity. Sticker prices of everything from food to furniture go up when the cost of diesel goes up, as the fuel is mainly used in freight transportation, manufacturing, agriculture, and global shipping, analysts said. “In a world where buzzword seems to be ‘affordability’, that is certainly not going to help,” Cinquegrana said.
