Egypt Central Bank Holds Rates Steady After Change of Governor

FILE PHOTO: Central Bank of Egypt's headquarters is seen in downtown Cairo, Egypt February 25, 2021. REUTERS/Mohamed Abd El GhanyREUTERS
FILE PHOTO: Central Bank of Egypt's headquarters is seen in downtown Cairo, Egypt February 25, 2021. REUTERS/Mohamed Abd El GhanyREUTERS
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Egypt Central Bank Holds Rates Steady After Change of Governor

FILE PHOTO: Central Bank of Egypt's headquarters is seen in downtown Cairo, Egypt February 25, 2021. REUTERS/Mohamed Abd El GhanyREUTERS
FILE PHOTO: Central Bank of Egypt's headquarters is seen in downtown Cairo, Egypt February 25, 2021. REUTERS/Mohamed Abd El GhanyREUTERS

The Central Bank of Egypt (CBE) kept its overnight interest rates steady on Thursday, hours after a new governor was named to replace Tarek Amer, who quit on Wednesday.

President Abdel Fattah al-Sisi appointed Hassan Abdalla as caretaker CBE governor on Thursday after Amer's resignation.

Analysts said the CBE may have been conservative after the change of governor, even as Egypt's economy grew faster than expected in the 2021/22 fiscal year and inflation surged.

The CBE's Monetary Policy Committee (MPC) said it left its lending rate unchanged at 12.25% and its deposit rate at 11.25%, Reuters reported.

"The MPC decided that keeping policy rates unchanged remains consistent with achieving price stability over the medium term," it said in a statement accompanying the rates decision.

A Reuters poll of 15 analysts taken prior to Amer's resignation had expected a half a percentage point increase.

"In its decision to maintain policy rates unchanged today, the MPC takes note of its policy rate hikes in its previous meetings," the MPC added.

The central bank raised rates by 2 percentage points in May and 1 percentage point in March to combat inflation after Russia's invasion of Ukraine and US interest rate hikes.

"The committee likely wants to proceed cautiously during the transition period," said Sara Saada of CI Capital.

Egypt's gross domestic product grew by 6.2% in the fiscal year that ended on June 30, up from 3.3% a year earlier.

This was mainly driven by the private sector, particularly non-petroleum manufacturing, tourism, and trade, the MPC said, citing data from the first nine months of the fiscal year.

Inflation rose to 13.6% in July from 13.2% in June, its fastest since in March 2019.

At its last meeting on June 23, the MPC said that for the next six months it would tolerate elevated inflation, caused mainly by the Ukraine crisis, as the economy grows more slowly than expected.

"We expect no changes in the policy rates until the new CBE leadership settles in and takes stock of the situation," said Allen Sandeep of Naeem Brokerage.

Esraa Ahmed of Pharos said she believed the MPC left rates unchanged for fundamental reasons, including a gradual decrease in global commodity prices and less pressure on the budget.

"We had that view even before the change in governor," she said.



Gold Hits Three-week Peak on Softer Dollar and Safe Haven Inflows

Gold bullion displayed in a store in the German city of Pforzheim (dpa)
Gold bullion displayed in a store in the German city of Pforzheim (dpa)
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Gold Hits Three-week Peak on Softer Dollar and Safe Haven Inflows

Gold bullion displayed in a store in the German city of Pforzheim (dpa)
Gold bullion displayed in a store in the German city of Pforzheim (dpa)

Gold prices touched their highest level in three weeks on Friday supported by a softer dollar and safe-haven buying, while markets braced for potential economic and interest rate changes from US President-elect Donald Trump's proposed policies.

Spot gold was little changed at $2,658.11 per ounce, as of 1115 GMT, hitting its highest level since Dec. 13. Bullion is up about 1.5% for the week so far.

US gold futures were steady at $2,672.20.

The dollar index fell 0.3% from over a two-year high hit in the previous session, making dollar-priced bullion more affordable for holders of other currencies, Reuters reported.

"Gold bulls are setting the tone early doors this year, enjoying the lift from safe haven bids while riskier equities struggle to hold on to nascent gains," said Exinity Group Chief Market Analyst Han Tan.

On the geopolitical front, in Gaza Israeli airstrikes killed at least 68 Palestinians, Gaza authorities said. While, Russia launched a drone strike on the Ukrainian capital Kyiv on Wednesday, city officials said.

Trump's inauguration on Jan. 20 has heightened uncertainty, with his proposed tariffs and protectionist policies expected by many economists to be inflationary and potentially spark trade wars.

"Markets are aware that Trump's policies risk reawakening US inflationary impulses, which should be a boon for gold so long as markets adhere to the precious metal’s role as an inflation hedge," Tan added.

Bullion, which is considered a hedge against economic and geopolitical uncertainties, tends to thrive in lower interest rate environment.

After delivering three consecutive interest rate cuts in 2024, the US central bank now projects only two reductions in 2025 due to due to stubbornly high inflation.

Spot silver rose 0.6% to $29.75 per ounce.

"Lower real US yields and stronger global industrial production should favor the metal in 2025," UBS said in a note, adding that they see silver to trade between $36-38/oz in 2025.

Platinum added 0.8% to $930.09, and palladium gained 1.2% to $922.58. Both metals were on track for weekly gains.