The Egyptian Central Bank offices in Cairo, Egypt (AP)
The Central Bank of Egypt’s (CBE) Monetary Policy Committee (MPC) is scheduled to hold its fourth meeting in 2020 on Thursday to review the CBE’s key interest rates amid forecasts by analysts that the MPC will maintain the current interest rates.
On 16 March, the MPC held an unscheduled meeting on the back of COVID-19 outbreak. The meeting resulted in introducing three percent (3bps) cuts to the overnight deposit rate, overnight lending rate, and the rate of the main operation by 300 basis points to 9.25 percent, 10.25 percent, and 9.75 percent, respectively.
The discount rate was also decreased by 300 basis points to 9.75 percent.
Economic expert Yasser Agiba expected the MPC will keep the current interest rates driven by the strength of Egypt’s banking system.
Speaking to Ahram Online, Agiba said that if the MPC introduced more cuts, bank profits would be affected, especially with the offering of the 15 percent increased proceed certificates, which would harm the whole banking system.
He added the MPC decision will be taken in light of global and domestic global challenges and the effect of the recent cuts on the market and the monetary policy.
Head of research at Pharos Holding Radwa El-Sweify expects the MPC will maintain the current interest rates on the back of the unprecedented cuts the committee introduced in March.
She added to Ahram Online that the CBE needs to explore the effects of the recent cuts on the market and the economic activity in the domestic market, especially that these cuts were introduced to stimulate the national economy which was affected harshly due to COVID-19 outbreak.
Meanwhile, HC for Investment and Financial Securities expected, in a research paper, the MPC will keep the current interest rates unchanged due to the projected inflation rate that will see an increase, expected to reach 11.45 percent on annual basis, resulting in increased demand on food commodities on the back of COVID-19 crisis.
The anticipated meeting by the MPC will come amid calls by international financial corporations for central banks to adopt easy-cycle policy regarding their monetary policy, including the International Monetary Fund and International Institute of Finance.