How will inflation decline affect economy?



Mon, 14 Oct 2019 - 03:41 GMT


Mon, 14 Oct 2019 - 03:41 GMT

 Economy Index - Pixabay

Economy Index - Pixabay

CAIRO – 14 October 2019: The decline in annual inflation rate for the fourth consecutive month to 4.3 percent in September confirms the safety of the measures undertaken to curb the inflationary wave after the decision to liberalize the exchange rate in November 2016, economist and head of the Capital Center for Economic Studies and Research Khalid al-Shafei said.

Shafei clarified in a statement that the rate of inflation in urban areas fell to 4.8 percent to the lowest level since November 2012, and core inflation fell to 2.6 percent in September, compared to 4.9 percent in August.

He added that on a monthly basis, inflation recorded -2.3 percent compared to 0.4 percent in the previous month, which means that the pace of commodity price rises has stalled.

He stressed that the decline in inflation to these levels may push towards an interest rate cut of about 1 percent at the next meeting of the Central Bank on November 14, 2019.

Shafei explained that this would have a positive impact on the debt of the government borrowed weekly to fill the budget deficit, pointing out that the interest rate cut also affects the decisions of investors to enter the Egyptian market, as well as the decisions of local investors to conduct investment expansions.

He said that after the liberalization of the exchange rate, interest rates in Egypt were raised to unprecedented figures to rein in inflation, and indeed the decline in monthly and annual inflation.

This decline in rates strongly supports the trend of rate cuts, and a wave of monetary easing from the central bank, which positively reflects on investment and the economy as a whole, according to Shafei.

"The decline of inflation has important impacts on the economy,” he noted, clarifying that any decline in inflation directly reflects on the decisions of expansionary companies, as well as on decisions of foreign investors, who monitor several indicators when making an investment decision, especially growth rates, inflation and interest, as well as consumption and market size.

The Central Agency for Public Mobilization and Statistics (CAPMAS) announced that annual inflation fell to 4.8 percent in September, compared to 7.5 percent in August and 15.4 percent in the same month of 2018, recording the lowest rates in about seven years.

After inflation's decline, will CBE cut rates in November?

CAIRO - 14 October 2019: Registering a fourth consecutive monthly decline, Egypt's inflation rates opened speculation once again in September about the expectations of the possible decision of the Central Bank of Egypt's Monetary Policy Committee (MPC) on interest rates at its November meeting.

Additional Reporting:Islam Said



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