The Monetary Policy Committee (MPC) at the Central Bank of Egypt (CBE) is set to meet later today to decide on policy rates. We expect a 25 basis points hike, a call we made following the release of the May inflation numbers last week, showing headline inflation accelerated to a one-year high of 12.3% Y-o-Y from 10.3% in April. More importantly, core inflation accelerated to a seven-year high of 12.2% Y-o-Y in May, clearly pointing to the inflationary pressures the economy has been experiencing as of late. These pressures have been mostly driven by the pass-through of the March devaluation, as well as seasonality associated with Ramadan. We argue that a seven-year high core inflation warrants a rate hike, though in this case, CBE may only push for a relatively small hike, given that further rate hikes are anticipated when the value-added tax (VAT) is introduced as planned sometime in 2H16. (Mohamed Abu Basha)