By: Heba El-Kordy
Cairo - Mubasher: Analysts and investors alike are showing more optimism regarding the decline in inflationary pressures in Egypt to its pre-flotation levels, as the central bank is nearing the long-awaited decision of lowering interest rates.
Annual inflation rate went down to 17% last month, recording its lowest level since November 2016, as shown by the data of the Egyptian Central Agency for Public Mobilization and Statistics (CAPMAS).
Macroeconomic analysts told Mubasher that the higher-than-expected drop in inflation is a good indicator of approaching their target.
Interest rates are expected to be cut in the next meeting for the Central Bank of Egypt’s (CBE) Monetary Policy Committee (MPC), and could reach 13% by the year-end.
Inflation rates were expected to register 18% in January, according to analyst Hany Farahat of CI Capital.
A further decrease in inflation is a positive sign, and it is expected to average 15% in 2018, Farahat noted, adding that the central bank is now more likely to cut interest rates by 5% this year.
Lower inflation rates shall enhance investors’ confidence in the Egyptian market, and will decrease the cost of financing for the private sector, while also helping to reduce interest payments in the general budget, said Israa Ahmed, an economic analyst in MubasherTrade Research.
It is worth noting that inflation rates surged since the Central Bank of Egypt (CBE) decided on 3 November 2016 to float the Egyptian pound (EGP).
The decision was part of the country’s economic reforms that included lowering energy subsides, which also contributed to the surge in prices, leading inflation rates to exceed 30%.
The decision to free the exchange rate of the local currency was accompanied by a 300 basis points (3%) interest hike, followed by two 2% hikes in May and July, adding a total of 7% to the interest rates.
Translated by: Moslem Ali
