Egypt’s central bank on Thursday cut the overnight deposit rate by 150 basis points to 14.25 percent, for the first time since February, after July inflation figures came in significantly below expectations.
The overnight lending rate was cut by 150 basis points to 15.25 percent, the bank said in a statement after a meeting of its monetary policy committee (MPC).
The move came after headline inflation slowed to 8.7 percent in July from 9.4 percent in June, surprising analysts who had expected inflationary pressures to rise in the wake of a round of subsidy cuts that pushed fuel prices 16-30 percent higher.
“The drop in inflation emboldened them to go deeper,” said Maya Senussi, senior economist for the Middle East at Oxford Economics.
“The decision also probably reflected low trending oil prices,” she said. “And the assumption that the second-round inflationary impact of the subsidy cuts will be limited.”
Analysts expect further rate cuts, with Egyptian investment bank CI Capital forecasting a 1 percent cut in September.
“As incoming data continued to confirm the moderation of underlying inflationary pressures, the MPC decided to cut key policy rates by 150 basis points,” the bank statement said.
“The path for future policy rates remains a function of inflation expectations, rather than of prevailing inflation rates,” it added.
