CBE foreseen to cut interest rates 0.5% Thursday

CAIRO – 27 September 2017: The Central Bank of Egypt (CBE) is expected to cut interest rates by 50 basis points (0.5 percent) in the next Monetary Policy Committee (MPC) meeting scheduled for September 28, investment bank Pharos Holding stated.

The forecast by Pharos Holding’s is based on their prediction for the inflation to decrease from 33 percent in the first quarter (Q1) of fiscal year 2017/18 to 27.1 percent in Q2 of the same fiscal year; expecting CBE’s annual inflation target rate of 13 percent year-on-year (± 3%) to happen by Q2 FY 2018/19.

Pharos’ economist Ramy Oraby said in the research note that the GDP growth rate has gained some strength in Q1 of the current fiscal year, “accordingly, we remain tentative whether the real absorption growth pace would be enough to convince the MPC to start monetary easing earlier than originally anticipated,” he said.

The last MPC meeting on August 17 resulted in the stabilizing of the overnight deposit and lending rates at 18.75 to 19.75 percent, respectively.

In early July, the CBE decided to raise interest rates by two percent in a surprise move aimed to tame inflation, which was expected to rise 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. That was the third time the CBE raised interest rates since the flotation of the Egyptian pound in November last year.