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Thursday, 16 June 2022

THIS MORNING: Fed announces biggest rate hike since 1994; Next week is officially budget week

What a way to close a very interesting week, ladies and gentlemen. With the Fed’s rate hike dominating global headlines, we saw our own gas hub ambitions soar with a landmark agreement.

We also have M&A news. A lot of them. Most significantly, UAE’s Aldar is reportedly interested in Madinat Nasr Housing and Development, while EFG Hermes’ Tanmeyah gave early investors in Fatura a nice surprise. We have more on them in the news well below. But first..

Egypt is firmly holding its gaze towards Africa: That’s the message we got from the African Export-Import Bank’s (Afreximbank) annual meetings, which kicked off in Cairo yesterday. Egypt is committed to increase its involvement with the bank and help grow its role in African trade, Central Bank of Egypt Governor Tarek Amer said at the opening ceremony.

With that, the National Bank of Egypt (NBE) has invested USD 326.6 mn in Afreximbank’s capital increase, maintaining its position as the lender’s biggest non-sovereign shareholder, according to a statement (pdf) from the bank.

On a lighter note, your commutes are going to get better as public schools close for the summer today.


THE BIG STORY here at home- Our regional gas hub ambitions went to the stratosphere: Egypt, Israel and the EU have signed a memorandum of understanding (MoU) to ramp up LNG exports to Europe, as the continent looks to phase out its reliance on Russian gas. The agreement will see Israel send more gas via a pipeline to Egypt’s LNG facilities before exporting it on tankers to European shores. There were no details on how much gas we will be exporting to the continent. We have more details in the news well below.

THE BIG STORY ABROAD- Fed goes Rambo on inflation and announces biggest rate hike in 28 years: The Federal Reserve approved the largest rate hike since 1994 yesterday as it fought to regain the narrative amid soaring inflation and growing market turmoil. Policymakers raised the benchmark rate by 75 basis points to a target range of 1.5-1.75% and said they would continue unwinding the Fed’s USD 9 tn balance sheet, a show of force designed to regain the market’s faith that it’s serious about getting inflation under control. The central bank is “highly attentive” to inflation and will move “expeditiously” to tame prices, Fed chair Jay Powell said at the post-meeting presser (watch, runtime: 1:54:46).

Same again in July? Powell raised the prospect of a second 75-bps hike at its next meeting in July, telling reporters that either 50 bps or 75 bps “seems likely,” though qualifying he doesn’t expect moves of this size to be common.

US rates are going to be significantly higher than expected come the end of the year: Policymakers now see rates ending 2022 at 3.4% and 3.8% at the end of 2023, significantly higher than the 1.9% and 2.8% forecast in March.

Can the Fed avoid triggering a recession? “The probability of a soft landing is certainly not zero, but it’s not high, and it will be a much more difficult target to hit as we move through this year,” one analyst told the Financial Times.

The markets cheered the news, with US stocks and bonds rallying following days of losses.

The picture in Asia is mixed this morning with shares in China and South Korea rebounding, and exchanges elsewhere in the region in the red. Futures indicate that shares in Europe and the US will see further gains when they open later today.

How is all this likely to affect monetary policy here at home? We’ll be out with our customary rate poll next week ahead of the CBE policy meeting on Thursday.

The move is headline news everywhere this morning: Reuters | AP | Bloomberg | FT | WSJ | CNBC | NYT | Washington Post.

WHAT’S HAPPENING TODAY-

The St. Petersburg International Economic Forum (SPIEF) continues today: Trade Minister Nevine Gamea and other Egyptian officials are attending the event, where Egypt has been made the guest of honor. President Abdel Fattah El Sisi is due to address the gathering via video link, an aide to President Vladimir Putin told Russian news agency RIA Novosti.

Food policy watchers would probably not want to miss the EU-Egypt Sustainable Food Value Chain conference, which is taking place at Grand Nile Tower Hotel. The conference will focus on things such as the policies governing supply chains of bakeries with a particular focus on the impact on SMEs.

NEXT WEEK-

MPs to vote on the budget next week: The draft 2022-2023 budget and the development plan will head to the House of Representatives next week, House Budget and Planning Committee Chairman Fakhri El Fiqi said yesterday. From Sunday, MPs will have three days to discuss the budget, with a final vote potentially being held on Tuesday.

REMEMBER- Under the constitution, MPs have to pass the budget for the next fiscal year before 30 June.

Foreign Minister Sameh Shoukry will head to Luxembourg to discuss energy with his EU counterparts, according to Africa Intelligence.

CIRCLE YOUR CALENDAR-

The first workshop in the government’s public consultations on its ambitious state ownership policy document begins next Sunday, according to the online platform for the consultations. Every Sunday and Tuesday will see workshops on specific industries, starting with an agriculture-focused workshop next Sunday and a food industries-focused workshop on Tuesday. Each Thursday is reserved for workshops with the House of Representatives or the Senate, along with think tanks.

** We have a date for the Amcham AGM: Our friends over at Amcham will hold their annual general meeting on Monday 27 June at the St. Regis Cairo Hotel. Finance Minister Mohamed Maait will address the gathering.

There’s a handful of conferences coming up next week:

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

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