Central Bank of Egypt’s - File Photo
CAIRO – 16 August 2017: The Central Bank of Egypt’s (CBE) Monetary Policy Committee is expected to keep interest rates on hold in its Thursday meeting, HC Securities said in a Wednesday research note.
The current interest rates will remain stable to benefit from them until inflation rates return to normal levels in September, senior economist at HC Securities Sara Saada said in the report.
The latest economic measures undertook in July [raising fuel price] have contributed to inching up monthly inflation rate, Saada explained, adding that these measures have led to improving market vision and addressed concerns.
“We expect the latest interest rate to have a limited impact on mitigating inflation, which we expect to go back to normal levels in September,” the economist said.
In early July, the CBE decided to raise interest rates by two percent in a surprise move aimed to tame inflation, which is expected to rise over the coming period after slashing fuel and electricity subsides and following a one percent increase in the Value Added Tax (VAT).
The CBE hiked the overnight deposit rate to 18.75 percent from 16.75 percent and the overnight lending rate to 19.75 from 17.75 percent. This is the third time the CBE raises interest rates since the flotation of the Egyptian pound in November last year.
Returns on treasury bills declined more than 200 basis points on different terms after the interest rate hikes, which gave rise to a greater possibility that the CBE would reflect that on interest rates over the coming months.
Saada noted that the Egyptian pound recorded improvements over the past month to average LE 17.90 per $1, compared to LE 18.1 per $1 over the previous three months.
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