FILE - Capital Economics
CAIRO - 11 March 2020: Capital economics expected the Central Bank of Egypt (CBE) to cut the interest rates by 50 basis points during its coming meeting on April 2.
It attributed this expectation to the spread of coronavirus and the drop of the inflation during February below the lower band of the CBE’s target range.
The Central Bank of Egypt’s (CBE) target range is 9 percent, plus or minus 3 percentage points.
"We expect the interest rate to be reduced to 10 percent by the end of this year and to 9.50 percent by end-2021," it added.
The investment bank has a previous expectation that the CBE would hold off from resuming its easing cycle until the middle of the year.
On Tuesday, the Central Agency for Public Mobilization and Statistics (CAPMAS) announced that Egypt’s annual consumer price inflation recorded 4.9 percent in February 2020, compared to 13.9 percent in February 2019.
"The breakdown showed that this was driven by a sharp fall in food inflation – which accounts for a third of the basket. It slumped from 2.6 percent y/y in January to -0.9 percent y/y last month. The decline in food inflation knocked 1.1 percent-pts off the headline rate. Easing price pressures among other major price categories, namely, transport, health, and clothing inflation, also brought the headline rate down," it commented.
The investment bank added that the Egyptian pound has continued to hold up. It has strengthened by 2 percent against the dollar so far this year, but more pressing is the outbreak of coronavirus in the country. "The number of cases has jumped sharply in the past week and concerns about its economic hit have intensified."
Out of Egypt's 60 confirmed coronavirus cases, the people who have tested negative amounted to 25 Tuesday after receiving the appropriate healthcare.
The condition of the 26 people is stable and they are still in the quarantined hospital in Matrouh, being treated according to the guidelines of the World Health Organization.