HC says Egypt c.bank to cut rates by 100 bps this week

Investment bank HC Securities and Investment expects Egypt’s central bank will cut interest rates by 100 basis points (bps) during its monetary policy meeting next Thursday.

According to HC, the headline inflation continued to decelerate over three consecutive month from its high level in May at 14.1 percent, with August monthly inflation coming in lower than expected 1 percent month-on-month.

“We see inflationary pressures largely subsiding following the July subsidy cuts. Yearly inflation dropped below 9 percent y-o-y, well within the CBE target of 9 percent (± 3percent) in 4Q20, providing room for the CBE to proceed with monetary easing to stimulate economic growth and stock market activity.” said HC senior economist Monett Doss.

“Moreover, in the global context of monetary easing, with the European Central Bank (ECB) cutting its deposit rate by 10 bps to -0.5 percent last week, Egyptian treasuries continue to provide attractive return and encourage carry trade. That said, we expect the CBE to cut rates by 100 bps in its upcoming meeting.”, Doss added.

The Central bank of Egypt’s (CBE) at its last Monetary Policy Committee meeting on 22 August  reduced policy rates by 150 bps after keeping them unchanged for three consecutive meetings since the last 100 bps rate cut in February 2019.