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.”


Big oil feels the heat on climate as industry leader promises: ‘We will be different’

Updated 22 January 2020

Big oil feels the heat on climate as industry leader promises: ‘We will be different’

  • Trump singles out ‘prophets of doom’ for attack
  • Greenpeace told the Davos gathering that the world’s largest banks, funds and insurance companies had invested $1.4 trillion in fossil fuel companies since the Paris climate deal

LONDON: Teenage environmental activist Greta Thunberg slammed inaction over climate change as the global oil industry found itself under intense scrutiny on the opening day of the World Economic Forum in Davos.

The teenage campaigner went head to head with US President Donald Trump, who dismissed climate “prophets of doom” in his speech.
She in turn shrugged off the US president’s pledge to join the economic forum’s initiative to plant 1 trillion trees to help capture carbon dioxide.
“Planting trees is good, of course, but it’s nowhere near enough,” Thunberg said. “It cannot replace mitigation. We need to start listening to the science and treat this crisis with the importance it deserves,” the 17-year-old said.
The 50th meeting of the World Economic Forum was dominated by the global threat posed by climate change and the carbon economy.
The environmental focus of Davos 2020 caps a year when carbon emissions from fossil fuels hit a record high, and the devastating effects of bushfires in Australia and other climate disasters dominated the news.
Oil company executives from the Gulf and elsewhere are in the spotlight at this year’s Davos meeting as they come under increased pressure to demonstrate how they are reducing their carbon footprint.
“We are not only fighting for our industry’s life but fighting for people to understand the things that we are doing,” said Vicki Hollub, CEO of Occidental, the US-based oil giant with extensive oil operations in the Gulf. “As an industry when we could be different — we will be different.”

‘Planting trees is good, but nowhere near enough,’ activist Greta Thunberg told Davos. (Shutterstock)

She said the company was getting close to being able to sequester significant volumes of CO2 in the US Permian Basin, the heartland of the American shale oil industry which is increasingly in competition with the conventional oil producers of the Arabian Gulf.
“The Permian Basin has the capacity to store 150 gigatons of CO2. That would be 28 years of emissions in the US. That’s the prize for us and that’s the opportunity. People say if you’re sequestering in an oil reservoir then you are producing more oil, but the reality is that it takes more CO2 to inject into a reservoir than the barrel of oil that it makes come out,” Hollub said.
The challenge Occidental and other oil companies face is to make investors understand what is happening in this area of carbon sequesteration, she added.
The investment community at Davos is also looking hard at the oil industry in the face of mounting investor concerns.
Greenpeace told the Davos gathering that the world’s largest banks, funds and insurance companies had invested $1.4 trillion in fossil fuel companies since the Paris climate deal. It accused some of these groups of failing to live up to the World Economic Forum goal of “improving the state of the world.”