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CBE expected to further cut interest rates on falling inflation

CBE expected to further cut interest rates on falling inflation
The country is likely witness inflation rates between 4-5% in November

By: Heba El-Kordy 

Cairo – Mubasher: The slowdown of Egypt’s inflation rate to 4.3% last September raised forecasts that the Central Bank of Egypt (CBE) will resume its easing cycle by reducing key interest rates for the fourth time in 2019.

The North African nation’s annual inflation rate dropped to its lowest level since December 2012 as the Egyptian pound has strengthened against the US dollar since early 2019, Esraa Ahmed, a senior economist at SHUAA Capital, remarked.

The senior economist forecast the country’s inflation rate to reach 3% in October in case there are no unexpected increases in food prices.

In addition, the country is likely witness inflation rates between 4-5% in November and between 7-8% in December, she noted.

The impact of the base year is expected to resume until November, she added, ruling out that inflation rates would exceed the CBE’s target of 9%, plus or minus 3 percentage points, by the end of 2020.

For her part, Mona Bedeir, a senior economist at Prime Securities, expected the CBE to slash the overnight deposit rate by 100 basis points (bps) to 12.25% in its meeting in November.

She added that easing inflationary pressures as well as rebounding economic activity will allow the CBE once again to resume its easing cycle in the current period.

According to a recent report released by Beltone Financial, the CBE’s Monetary Policy Committee (MPC) is projected to cut interest rates by 50-100 bps in its meeting to be held on 14 November, in addition to a further cut of 300 bps in 2020.

The report also expected the average inflation rate to register 4.2% during the fourth quarter of 2019.

However, Esraa Ahmed recommended keeping interest rates unchanged, noting that a cumulative interest rate cut of 3.5% would be enough for the year.