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Egypt's central bank cuts key interest rates

Ahram Online , Thursday 15 Jan 2015
 Hisham Ramez
Egypt Central Bank's governor, Hisham Ramez (Photo: Al-Ahram)
Views: 4912
Views: 4912

Egypt's Central Bank surprisingly cut key interest rates by 50 basis points on lower inflation expectations driven by cheap oil.

The overnight deposit and lending rates were cut to 8.75 percent and 9.75 percent respectively, the Central Bank of Egypt's Monetary Policy Committee announced on Thursday. The discount rate was also cut to 9.25 percent.

"Upside risks from imported inflation continue to be contained on the back of lower oil prices and the consequent revision in international food price forecasts," it said in a statement.

"In light of recent global developments and the reassessment of risks surrounding the inflation outlook and domestic GDP, the MPC decided to cut the key... rates."

Key interest rates were last changed in July 2014, when the committee raised them 100 basis points each to contain inflation following the government's decision to cut fuel subsidies.

The central bank "does not have any reason to keep rates high," Hany Genena, chief economist at Pharaos Holding, said in a phone interview. "All the factors, especially the fall in oil prices, indicate that inflation in the coming six months or even year will be dropping."

Brent crude prices have dropped about 54 percent in the past year on oversupply and weak demand from Europe and Asia. Brent crude was down 26 cents a barrel on Thursday at $48.43 a barrel.

"The fall in oil prices means that producers locally and internationally have no reason to raise prices," Genena said, highlighting the potential benefits of cutting rates. "A lower interest rate means cheaper borrowing for the government and further support to the private sector."

The shock from July's cut in fuel subsidies, which raised pump prices by up to 78 percent, is "easing," Genena said. "Even if diesel prices increase in Egypt, the fall in oil prices internationally means that production inputs will be cheaper for local producers."

Prices rose an annual 10.13 percent in December from 9.1 percent in November.

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Sherif Shehata
16-01-2015 10:58pm
Well done,Mr Hisham Ramez but as I said that please let me ask you some questions. 1- Why Egyptians banks are a charge people for savings Account? This people like to help Egypt. 2- Why all the Bankers have Bonus each year if the the bank don't make profit for the year ended? please Mr President EL-sis's,look at Egyptians Banking system issues. Anyway All the Banks around the world have been cut the interest Rates. All we need to be honest and to do our jobs right. God save Egypt.
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