Interest Rate Reduction in Egypt Is Subject to Energy Pricing Policy- Arqaam Capital

Interest Rate Reduction in Egypt Is Subject to Energy Pricing Policy- Arqaam Capital

Thursday, 8 February, 2018 - 14:30
Cairo- Asharq Al Awsat\
As the business community in Egypt expects the Central Bank of Egypt (CBE) to reduce the interest rate, Arqaam Capital noted the possibility that this step might take some time amid pursuits to contain inflation and limit the reduction to 500 basis points during the current year.

The bank gradually increased the interest prices on depositing and lending since the beginning of reforms to contain the aggravating financial crisis during the fourth quarter of 2017. Since November 2016, the interest hike reached 700 basis points.

Bloomberg reported that Egypt’s central bank plans to start easing monetary policy soon, once it’s convinced inflation has been reined in. Governor Tarek Amer said, “We want to make sure inflation is under control before we move so we don’t have to go back.”

Arqaam Capital expected earlier that the central bank will start dropping the interest rate starting next February, but it revealed in its latest report that holding presidential elections earlier than expected led to considering that the central bank will follow a stricter approach.

The bank declared that the inflation data of January, which will be announced on Feb. 10, will have a vital role in determining whether the interest rate will be dropped or maintained in February until May or even June.

Egypt has started since the fiscal year 2014-2015 a gradual plan to dissociate electricity and fuel subsidies but the latest rise in global oil prices was increasing the gap between prices of energy items and the actual cost.

The International Monetary Fund (IMF) expected the budget deficit in Egypt during the current year to represent 9.2 percent of GDP.

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