Central bank of Egypt cuts key rates again as inflation continues to ease

Egypt’s central bank cut Thursday its key interest rates by 100 basis points for the second meeting in a row as inflation continued to ease.

The bank cut its overnight deposit rate to 16.75 percent from 17.75 percent and its overnight lending rate to 17.75 from 18.75 percent, the central bank said in a statement.

“The central bank’s decision to cut interest rates by 100 basis points is in line with market expectation; an anticipated move,” Yara Kahky, an economist at Naeem Brokerage in Cairo, told Reuters.

Nine out of 11 economists polled by Reuters earlier this week had predicted the cuts.

Inflation climbed after Egypt floated its currency in November 2016 to secure a $12 billion International Monetary Fund deal aimed at boosting the economy. Inflation has gradually eased since.

Annual urban consumer price inflation fell to 14.4 percent in February while core inflation, which strips out volatile items like food, fell to 11.88 percent.

To combat inflation after the currency float, Egypt had raised its rates by 7 percentage points.

“Domestic risks surrounding the inflation outlook include the evolution of inflation expectations, the timing and magnitude of potential subsidy-reform measures, as well as demand-side pressures,” the bank said.

It added: “Risks from the global economy are crude oil price developments and the pace of tightening financial conditions.”

Egypt’s economy has struggled since a 2011 uprising drove tourists and foreign investors away. The country hopes sweeping economic reforms it embarked on in 2016 will put its economy on the right track.

Source: Reuters