Egypt’s central bank seen making fourth consecutive interest rate cut

The headquarters of Egypt's Central Bank are seen in downtown Cairo, Egypt January 11, 2018. (Reuters)
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Updated 14 January 2020

Egypt’s central bank seen making fourth consecutive interest rate cut

  • Analysts say inflation still low enough for further cuts
  • Central bank cut rates by combined 450 bps in 2019

CAIRO: Egypt’s central bank is likely to cut interest rates for a fourth consecutive time on Thursday, a Reuters poll showed, despite inflation rising in December.
Eight out of 11 economists surveyed by Reuters expected the Central Bank of Egypt (CBE) to cut rates. Four saw a 50 basis point cut and four predicted a 100 bps cut.
“With December inflation confirming inflation will normalize at 6-7%, we think the CBE has ample room to continue reducing interest rates,” said Mohamed Abu Basha of EFG Hermes, who predicted a 50 bps cut.
Egypt’s annual urban consumer price inflation rose to 7.1% year-on-year in December from 3.6% in November, though this had been expected as favorable base-year effects wore off.
Inflation had fallen as far as 3.1% in October, its lowest since December 2005. Month-on-month urban headline inflation stood at -0.2% in December from November, falling for a second consecutive month.
The CBE cut rates by a combined 350 basis points at its last three consecutive meetings, and 100 bps in February 2019. The overnight rates are at 12.25% for deposit and 13.25% for lending.
The bank’s monetary policy committee had been due to meet on Dec. 26 but the meeting was postponed to Jan. 16 pending the confirmation of committee members under governor Tarek Amer’s second four-year term.
“I expect to see the MPC of the Central Bank of Egypt continue the trend, seen over the last year, of cutting rates by 100 bps,” said Angus Blair of business and economic forecasting think-tank Signet.
“The main beneficiary of the cut in rates is the government, which will see greater and much-needed fiscal manoeuvrability, as well as a few stock market listed indebted companies.”
Radwa El-Swaify of Pharos Securities Brokerage was one of three economists to forecast that the CBE would hold rates steady.
“We expect the CBE to hold rates constant on Jan. 16, in light of the uptick in inflation, in order to assess the impact of the previous rate cuts, and in light of geopolitical unrest in the region,” she said.
Swaify added that the CBE would “start resuming a less aggressive easing cycle in 2020 whereby we expect a 200-300bps cut in rates over the course of the calendar year.”


Saudi Arabia, Iraq confirm full commitment to OPEC+ agreement- statement

Updated 18 min 2 sec ago

Saudi Arabia, Iraq confirm full commitment to OPEC+ agreement- statement

  • Both countries ministers said efforts by OPEC+ to meet their output cuts will enhance market stability

RIYADH: Saudi Arabia and Iraq on Monday confirmed their full commitment to the OPEC+ agreement.
Saudi Minister of Energy Prince Abdulaziz bin Salman, and Iraqi Oil Minister Ihsan Abdul Jabbar Ismail held discussions on developments in the oil markets, the improved global demand for oil, and progress in implementing the current OPEC+ agreement to reduce production.
OPEC and its allies led by Russia, a group known as OPEC+, agreed to cut oil output from May by a record 9.7 million barrels per day (bpd) after the coronavirus crisis destroyed a third of global demand.
The record cuts are now due to run to the end of July, before tapering to 7.7 million bpd until December.
But some OPEC members have not fully delivered on their agreed production cuts since May.
During a phone call, the Saudi minister commended Iraq’s performance within the framework of the agreement, as the country’s level of commitment in June reached nearly 90 percent.
Prince Abdulaziz thanked the Iraqi minister for his efforts in reaching the target, and expressed his confidence that Iraq will continue to improve its level of compliance with the oil cuts.
Ismail said Iraq would continue to improve compliance with the cuts to reach 100 percent by the start of August, pledging to compensate from July to September for the overproduction in May and June.
Both ministers also said that efforts by OPEC+, and the participating countries in the agreement, to meet their output cuts would enhance market stability and speed up their balanced recovery.

  • With Reuters