Cairo – Mubasher: The Central bank of Egypt (CBE) is likely to keep interest rates unchanged, based on four main factors, MubasherTrade Research said in a recent report.
The first factor is that Egypt’s annual inflation rates are rising above 30%, MubasherTrade highlighted, believing that rates will keep current high levels until the base effect helps drag inflation rates down.
The Central Agency for Public Mobilization and Statistics (CAPMAS) had previously announced that Egypt’s annual inflation rate rose to 31.8% year-on-year in October 2017.
MubasherTrade forecasts the annual inflation rate to ranges between 24% and 25% by the end of November.
As for the second factor, Egypt’s Balance of Payments is still bolstered by the capital account’s portfolio investments, noting that the monetary authority still needs a high level of foreign purchases of local debt instruments.
“Recent news has shown that foreign holdings of treasury bills (T-bills) have dropped for the first time since the Egyptian pound flotation. […] We believe the CBE would not want to place more pressure on foreign investors for the time being,” the research firm continued.
The report indicated that the US Federal Reserve plan to raise interest rates and the tightening global monetary scene are among the factors which will affect the CBE’s decision.
“We think the Egyptian monetary policymaker will try to maintain the high rates as long as possible lest foreign investors turn bearish on Egyptian debt instruments,” the report concluded.
In September, the CBE’s Monetary Policy Committee (MPC) announced hiking overnight deposit interest rate and overnight lending to 18.75% and 19.75%, respectively.
