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CBE expected to keep interest rates unchanged on EGP depreciation

CBE expected to keep interest rates unchanged on EGP depreciation
The local currency depreciated by 3% against USD in the last period

By: Heba El-Kordy

Cairo – Mubasher: Analysts are expecting the Central Bank of Egypt’s (CBE) monetary policy committee (MPC) to keep interest rates unchanged in its next meeting on Thursday.

The depreciation of the Egyptian pound by about 3% against the US dollar as well as the historic 3% interest rate cut approved last March raise expectations that the CBE will maintain interest rates in the coming period.

The drop in global prices and the stabilisation in oil markets coupled with the coronavirus (COVID-19) impact on unemployment rate and PMI readings over the last months will keep inflation rates within the CBE’s target range, Mona Bedair, a macroeconomic analyst, said.

Pressures on the local currency and the limited impact of monetary policy on demand will most likely make the CBE leave interest rates unchanged.

On 14 May, the CBE decided to keep the overnight deposit rate, overnight lending rate, and the rate of the main operation unchanged at 9.25%, 10.25%, and 9.75%, respectively. The discount rate was also kept unchanged at 9.75%.

Radwa El-Swaify, head of research sector at Pharos Holding for Financial Investments, also expects interest rates to remain unchanged until the end of 2020.

El-Sewaify further projects that inflation rate will be lower than the CBE’s target range this year.

Egypt's annual headline inflation rose by 0.1% to 107.7 points in May from 107.5 points a month earlier, according to the Central Agency for Public Mobilization and Statistics (CAPMAS).

Year-on-year, the most populous Arab nation’s annual inflation registered 5% in May, compared to 13.2% in the same month in 2019.