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Wednesday, 12 August 2020

Egypt’s central bank likely to maintain interest rates during Thursday meeting

Head of research at EFG Hermes Ahmed Shams El-Din told Ahram Online that the CBE is anticipated to maintain the current rates as the headline inflation rate is in the range the CBE has set at nine percent

Doaa A.Moneim , Thursday 25 Jun 2020
The headquarters of Egypt
The headquarters of Egypt's Central Bank are seen in downtown Cairo (Reuters)
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The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) is holding a meeting on Thursday to review key interest rates amid expectations the committee is likely tomaintain the current interest rates.

On 14 May, the MPC decided to keep the CBE’s overnight deposit rate, overnight lending rate, and the rate of the main operation unchanged at 9.25 percent, 10.25 percent, and 9.75 percent, respectively. The discount rate was also kept unchanged at 9.75 percent.

Head of research at EFG Hermes Ahmed Shams El-Din told Ahram Online that the CBE is anticipated to maintain the current rates as the headline inflation rate is in the range the CBE has set at nine percent.

In June, the CBE announced that the annual core inflation rate slipped to 1.5 percent year-on-year in May, down from 2.5 percent in April, while the Central Agency for Public Mobilisation and Statistics (CAPMAS) said that Egypt’s annual urban consumer price inflation rate declined to 4.7 percent in May, down from 5.9 percent in April, recording the lowest figure in six months.

Shams El-Din added that the CBE is not expected to introduce more cuts in 2020 especially that it had slashed the key interest rates in March by three percent (300 bps) amid the COVID-19 crisis.

In March, the MPC held an unscheduled meeting on the back of the COVID-19 outbreak, which resulted in cutting key interest rates as part of procedures the CBE has adopted to contain the repercussions of the COVID-19 crisis on the Egyptian economy.

HC Securities and Investments also expected the MPC to keep the current rates due to the decreasing inflation rate.

Yet, HC said that it expects inflation rates to surge to 8.4 percent in 2020, which is also in the range set by the CBE.

Meanwhile, a Reuters poll in June, including 17 analysts, expected the CBE to keep rates steady at its current rates.

Egypt’s FY 2020/2021 budget, in force starting 1 July, is drafted at EGP 2.2 trillion, EGP 1.7 trillion of which make up the expenses, with an increase of EGP 138.6 billion on FY 2019/2020, according to the Ministry of Finance.

The budget is the largest in Egypt’s history.

On Friday, the International Monetary Fund (IMF)’s Executive Board is expected to discuss and reach a decision regarding Egypt’s request to obtain a $5.2 billion loan under the standby agreement (SBA) which is anticipated to back the second wave of Egypt’s reform process with a special focus on the private sector, SMEs, and structural reforms. 

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