By: Heba El-Kordy
Cairo – Mubasher: Despite the recent decline in Egypt’s inflation in November 2018 to its lowest level in nine months, analysts and macroeconomists expect the Central Bank of Egypt (CBE) to keep interest rates unchanged at its next meeting.
Egypt’s annual inflation dropped to 15.6% in November from 26.7% in the same period of 2017, data released by the Central Agency for Public Mobilization and Statistics (CAPMAS). Data also showed that prices had fallen by 0.7% month-on-month in November.
In a survey conducted by Mubasher, investment bank officials and economic analysts projected that the CBE’s Monetary Policy Committee (MPC) would maintain interest rates, citing two major factors behind this decision, which is due later this week.
Analysts weigh in
EFG Hermes’ head of macroeconomic analysis Mohamed Abou Basha told Mubasher that the reason the CBE was likely to keep interest rates unchanged was that inflation was within the CBE’s target of 13% (+/-3%), which supports the ‘hold’ decision.
Abou Basha also forecast that CBE would maintain interest rates at their current level until the end of the fourth quarter of 2019, noting that the government, in the meantime, would continue to reduce subsidies on fuel and electricity.
According to a Mubasher survey, analysts forecast that the CBE would reduce interest rates by around 2% to 3% in 2019, while inflation would range between 13% and 15%.
Meanwhile, macroeconomist at CI Capital Hany Farahat said he expected the CBE to maintain interest rates in order to support the value of foreign investments amid the continued fears in emerging markets.
Foreign investments in the country’s treasury bills dropped to EGP 210.2 billion ($11.7 billion) in October from EGP 234.5 billion ($13.1 billion) in September, CBE data showed recently.
Farahat projected that the CBE would resume its dovish policy by Q1-19, indicating that he expects the bank to reduce interest rates by as much as 3% in 2019.
It is worth noting that the International Monetary Fund (IMF) had forecast that Egypt’s inflation would fall to 13.9% in 2018 and 12.9% in 2019, whereas Capital Economics had projected that Egypt’s inflation would reach 16% in 2018.
The CBE’s MPC will meet on Thursday, 27 December.
Translated by: Nada Adel Sobhi
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