Good morning, friends, and a very happy THURSDAY to you all. The big news today is that it’s interest rate day as the Central Bank of Egypt’s Monetary Policy Committee meets to review rates. There’s a firm consensus among analysts and economists we surveyed last week that policymakers will leave rates unchanged after inflation ticked upward in May.

Surely weighing on their thinking: The US Federal Reserve has signaled it could hike interest rates twice in 2023, ahead of its earlier forecast. We have more on that below. Any move to hike rates by the Fed will have implications for carry trades across emerging markets.

Where rates currently stand: The overnight deposit rate is at 8.25% and the lending rate 9.25%, while the main operation and discount rates are at 8.75%. Look for an announcement late this afternoon.

MEANWHILE- The EFG Hermes and Saudi Exchange Virtual Investor Conference (pdf) wraps up today. The event sees execs from 61 companies meeting with more than 450 international investors from over 190 institutions.

Remember that export credit risk guarantee company we heard about way back in November 2019? Well, the plans have apparently been dusted off and the wheels set in motion for the company to launch in the next two months, a Central Bank of Egypt advisor has reportedly said, according to Al Shorouk. The USD 600 mn company will be 100% owned by the central bank and will be dedicated specifically to increasing Egyptian exports to other African countries.

THE BIG STORY ABROAD- Biden v Putin is the biggest story in the pages of the foreign press this morning. The Swiss summit didn’t quite turn out to be The Great Confrontation that some in the Western press were longing for, with both leaders exchanging pleasantries — and agreeing to return diplomats to their respective embassies and dial back diplomatic tensions. All the same, stark differences remain on display, as little progress was made on issues including cybersecurity and human rights. Everyone from the AP and Reuters to the NYT and RT as the news.

***CATCH UP QUICK with the top stories from yesterday’s edition of EnterprisePM:

• NBE, Banque Misr, Banque du Caire to launch EGP 1 bn fund of funds targeting SMEs: The fund plans to invest in SMEs in healthcare, education, fintech, agribusiness, renewables, fast-moving consumer goods as well as information and communications technology, a BdC source told Enterprise.
• Flat6Labs hits first close on USD 20 mn Jordan fund: Flat6Labs has reached a USD 7.4 mn first close on a USD 20 mn seed fund targeting companies in Jordan that will invest in early-stage startups in ICT, education, healthcare, and other sectors.
• Liwwa to invest portion of USD 3 mn pre-series funding in expanding SME business in Egypt: The company has so far raised USD 1.3 mn of its USD 3 mn equity target, part of which will go towards obtaining an SME lending license in Egypt, expanding the business, and growing its tech team.

MARKET WATCH- Fed signals earlier than expected rate hike: The Federal Reserve could move to hike interest rates twice in 2023 as the US economic recovery accelerates and inflation rises. The central bank announced that its main interest rate would remain unchanged at 0-0.25% following the end of its two-day policy meeting yesterday, but gave no indication about when it could start unwinding its huge USD 120 bn per month bond-buying programme.

Is inflation giving the Fed cold feet? Federal Reserve officials seem to have shifted from their stance in March, when they indicated that rates would remain ultra low until 2024. “This change in stance jars a little with the Fed’s recent claims that the recent spike in inflation is temporary,” one economist told CNBC. The earlier than forecast rate hike comes as new projections predict that inflation will rise by more than previously thought. Though the central bank reiterated its belief that higher prices will be “transitory,” Fed boss Jay Powell acknowledged during his presser yesterday that there is a risk that inflation will accelerate beyond current expectations.

Action to support short-term funding markets: Policymakers moved to raise short-term interest rates in the funding markets amid concern that a USD shortage could push yields into negative territory and trigger a funding crisis among money market funds, according to Bloomberg.

The market wasn’t overjoyed at any of this: The news triggered a sharp sell-off in the treasury market, with the yield on five-year notes jumping more than 0.12% and the 10-year rate up 0.08%, and caused the USD to gain 0.8% against other major currencies. US stocks fell, with the S&P 500 down 0.5%, the Nasdaq 0.3% lower and the Dow 0.8% in the red.

Asian markets are are in largely in the red this morning, with only Shanghai (barely) clinging to the green. Futures suggest key indexes will open in the red on Wall Street, on Bay Street and in much of Europe later today.