CBE cuts interest rates for 2nd time in 2018 as inflation continues to ease

Egypt Today

The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) lowered the interest rates for the second time this year by 1 percent on Thursday. The Committee set the overnight rate and the overnight lending rate at 16.75 percent and 17.75 percent, respectively. In February, the MPC lowered the interest rates by 1 percent for the first time since the flotation of the Egyptian currency in the November 2016 after inflation rates slowed down in latest months.

Inflation rates recorded its lowest levels in February since the flotation of the Egyptian currency in November 2016. The annual inflation decreased to 14.4 percent last month, down from 17.1 percent in January. Research companies expected earlier the MPC to cut the interest rates for the second time this year, especially after the downtrend of inflation during latest months.

Mubasher Trade expected the Central Bank of Egypt's Monetary Policy Committee (MPC) meeting to cut the interest rates by 100 to 200 basis points. Pharos Research also predicted earlier that the Monetary Policy Committee of the Central Bank of Egypt will cut the policy rates by 100 basis points, following the inflation’s decline in February.

Fitch anticipated in a report that the central bank will cut rates further this year by potentially another 200-300bps, while maintaining positive real interest rates even as global rates rise. CI Capital and HC Securities and Investment expected a 100 basis points cut in March meeting, a prediction buoyed by cooling inflation.
A second rate cut of 50-100 basis points would be decided by CBE during March meeting, Investment Bank EFG Hermes anticipated as well.

The CBE has raised interest rates by a total of 7 percent since the flotation in late 2016 in a bid to curb inflation. Driven by flotation and cutting fuel subsidies, inflation spiked to a peak level of 33 percent in July 2017, however it started declining gradually afterwards.