Egypt’s central bank is likely to cut interest rates on Thursday after receiving US$6 billion in deposits from Gulf Arab allies to bolster foreign-currency reserves, the country’s biggest investment bank, EFG-Hermes said in a report today.
The Monetary Policy Committee, led by Governor Hisham Ramez, may cut the benchmark overnight deposit rate by 50 basis points, Cairo-based EFG-Hermes said in a note. Investment bank Pharos Holding is also predicting a similar reduction, while two other economists forecast rates to stay unchanged, according to a Bloomberg survey.
Egypt will pay 2.5 percent a year on the deposits received from Saudi Arabia, the United Arab Emirates and Kuwait, with maturities ranging from three to five years, Cairo-based Youm7 newspaper reported Wednesday, citing Ramez. Stocks climbed the most in more than two weeks in Cairo.
The aid “will boost reserves and leave the CBE without much concern over the stability of the pound in the short term,” Mohamed Abu Basha, an economist at EFG-Hermes, wrote.
The Gulf deposits, pledged during an economic conference last month, will help raise Egypt’s reserves to the highest level since October 2011, less than a year after the ouster of President Hosni Mubarak in a popular uprising.
Egypt’s annual urban inflation accelerated to 11.5 percent in March from 10.6 percent a month earlier, while core inflation stood at 7.21 percent. The gap between headline and core inflation signals “limited inflationary pressures,” Abu Basha wrote.