CBE keeps interest rates unchanged

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Thu, 17 May 2018 - 03:12 GMT

BY

Thu, 17 May 2018 - 03:12 GMT

CBE - File photo

CBE - File photo

CAIRO – 17 May 2018: The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) kept its interest rates unchanged on Thursday, setting the overnight deposit rate and the overnight lending rate at 16.75 percent and 17.75 percent, respectively.

The Monetary Policy Committee of the Central bank of Egypt lowered the interest rates twice earlier this year by 1 percent each time.

On March 29, the committee set the overnight rate and the overnight lending rate at 16.75 percent and 17.75 percent, respectively. In February, the committee lowered the interest rates by 1 percent for the first time since the flotation of the Egyptian currency in November 2016, after inflation rates slowed down.

HC Securities & Investment (HC) said earlier that the CBE will keep the interest rates fixed during the third quarter of 2018, with more decisions in the fourth quarter.

While Capital Economics said in a report that further decline of the inflation would push the Monetary Policy Committee to cut the interest rates for the third time during its meeting in May to have the overnight deposit rate at 13.75 percent by the end of this year.

Egypt's annual inflation rate fell to 13.1 percent in April from 13.3 percent in March, to record its lowest inflation rate since May 2016.

The Egyptian government expected inflation to decline by the end of this fiscal year from 17 percent to 13 percent, according to Minister of Finance Amr el-Garhy.

Inflation has increased in Egypt since the flotation of the Egyptian pound in November 2016, reaching a record high level in July 2017 due to energy subsidy cuts, after which it has gradually eased.

Capital Economics and Mubasher expected the inflation to rise in the upcoming period, stating that the first one or two months of the upcoming fiscal year 2018/2019 will witness a rise in the inflation rates, with the government's intention to cut subsidies.

Egypt targets to cut subsidies on fuel and food by 26 percent to LE 89.1 billion and 5 percent to LE 86.17 billion, respectively, and it also aims to raise food subsidies by about 5 percent to LE 86.175 billion.

According to Beltone Financial, the inflationary pressures are expected to decline as a result of the slower growth of cash liquidity in February, according to a report issued on April 10.

Beltone Financial clarified that the monthly rise in domestic cash liquidity decreased to 1.3 percent in February from 1.6 percent in January, adding that money supply slipped by 0.2 percent on a monthly basis, supporting the continuation of the downward trend of inflation.

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