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Egypt Central Bank Makes 2nd Consecutive Cut to Key Rates

Egypt Central Bank Makes 2nd Consecutive Cut to Key Rates

Friday, 27 September, 2019 - 07:45
Central Bank of Egypt's headquarter is seen in downtown Cairo, Egypt September 18, 2018. REUTERS/Mohamed Abd El Ghany

Egypt’s central bank on Thursday cut its key interest rates for the second month in a row, after inflation fell further and as central banks globally ease monetary policy.

The overnight deposit and lending rates were cut by 100 basis points to 13.25 percent and 14.25 percent respectively.

All 11 economists surveyed by Reuters had said the Central Bank of Egypt’s (CBE) monetary policy committee would cut rates. Five said the bank would cut by 100 bps, three predicted a 150 bps cut and three 50 bps.

“It’s good for the economy, but broadly in line with expectations,” said Allen Sandeep, head of research at Egypt-based Naeem Brokerage, which predicted a 150 bps cut.

“We expect the monetary easing cycle to continue as inflation is likely to drop further before the MPC meets again in November,” Sandeep said.

The central bank cut rates after inflation figures fell to their lowest in more than six years, it said in a statement.

“Globally, the expansion of economic activity continued to weaken, financial conditions eased, and trade tensions continued to weigh on the outlook,” the bank said. “International oil prices remain subject to volatility due to potential supply-side factors that include geopolitical risks.”

July inflation came in significantly below expectations, and the headline figure fell further in August to a six-year low of 7.5 percent. Headline inflation reached a 2019 high of 14.4 percent in February.

At its last policy meeting in August, the central bank slashed its overnight deposit and lending rates by 150 basis points to 14.25 percent and 15.25 percent respectively.

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