Egypt devaluation a step in the right direction

The decision this morning by the Central Bank of Egypt to devalue the pound and move to a more flexible exchange rate regime is a positive step and should help to improve the country’s balance of payments position. There will inevitably be some short-term pain – inflation is likely to rise and we’ve now pencilled in a 100bp rate hike at Thursday’s MPC meeting (previously 50bp). But over time, it should lay the foundations for a period of stronger economic growth.