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Egypt's Net Foreign Assets Drop by $1.3 Bln in February

The headquarters of the Central Bank of Egypt in the capital, Cairo. (Reuters)
The headquarters of the Central Bank of Egypt in the capital, Cairo. (Reuters)
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Egypt's Net Foreign Assets Drop by $1.3 Bln in February

The headquarters of the Central Bank of Egypt in the capital, Cairo. (Reuters)
The headquarters of the Central Bank of Egypt in the capital, Cairo. (Reuters)

Egypt's net foreign assets (NFAs) declined by 49.8 billion Egyptian pounds in February as pressure on the currency continued to build.

The second drop in as many months took NFAs to a negative 704.23 billion Egyptian pounds from minus 654.43 billion at the end of January, the Central Bank of Egypt data showed.

That equates to a February decline of $1.31 billion using end-of-month central bank exchange rates, Reuters calculations show.

The central bank allowed the Egyptian pound's official price to depreciate against the dollar by 1.4% in February.

The official exchange rate on Sunday was 30.9, while street dealers were offering to buy dollars for 36 pounds, down from 35 last week.

NFAs, which represent banking system assets owed by non-residents minus liabilities, have helped the central bank to support Egypt's currency over the past 18 months.

Egypt's NFAs had stood at a positive 248 billion pounds in September 2021, before the decline began.

Meanwhile, the National Bank of Egypt (NBE) and Banque Misr have recently issued two new certificates of deposit (CDs) with fixed yields of 19% and a decreasing yield of 22%.

The first certificate is fixed for three years at a rate of 19% annually, and the return is paid monthly. The other CD has a decreasing yield of 22%, disbursing a yield of 22% over the first year, 18% over the second year, and 16% over the third year, according to the Middle East News Agency (MENA).

The issuance of these certificates reflects the positive outlook of a drop in interest rates in the coming period and a gradual decline in inflation amid stability in the markets, added MENA.

Moreover, the central bank announced on Thursday that the Monetary Policy Committee (MPC) decided to raise key policy rates by 200 bps.

In its meeting, the overnight deposit rate, overnight lending rate, and the rate of the main operation were raised by 200 bps to 18.25%, 19.25%, and 18.75%, respectively.

Meanwhile, Egyptian Exchange (EGX) indexes posted collective gains at the close of Sunday's trading session.

The market capital gained about 18 billion pounds to close at 1.067 trillion pounds, amid transactions that totaled 2 billion pounds.

The EGX 30 benchmark index was up by 1.68%, registering 16,694.46 points.

The broader EGX 70 EWI index of the leading small and mid-cap enterprises (SMEs) increased by 1.41%, ending at 2,846.98 points.

The all-embracing EGX 100 index rose by 1.63%, closing at 4,301.27 points.

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Federal Reserve Cuts Key Interest Rate by a Quarter-point

US Federal Reserve Chair Jerome Powell attends a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, US, November 7, 2024. REUTERS/Annabelle Gordon
US Federal Reserve Chair Jerome Powell attends a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, US, November 7, 2024. REUTERS/Annabelle Gordon
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Federal Reserve Cuts Key Interest Rate by a Quarter-point

US Federal Reserve Chair Jerome Powell attends a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, US, November 7, 2024. REUTERS/Annabelle Gordon
US Federal Reserve Chair Jerome Powell attends a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, US, November 7, 2024. REUTERS/Annabelle Gordon

The Federal Reserve cut its key interest rate Thursday by a quarter-point in response to the steady decline in the once-high inflation that had angered Americans and helped drive Donald Trump’s presidential election victory this week.
The rate cut follows a larger half-point reduction in September, and it reflects the Fed’s renewed focus on supporting the job market as well as fighting inflation, which now barely exceeds the central bank’s 2% target, The Associated Press reported.
Asked at a news conference how Trump's election might affect the Fed's policymaking, Chair Jerome Powell said that "in the near term, the election will have no effects on our (interest rate) decisions.”
But Trump’s election, beyond its economic consequences, has raised the specter of meddling by the White House in the Fed’s policy decisions. Trump has argued that as president, he should have a voice in the central bank’s interest rate decisions. The Fed has long guarded its role as an independent agency able to make difficult decisions about borrowing rates, free from political interference. Yet in his previous term in the White House, Trump publicly attacked Powell after the Fed raised rates to fight inflation, and he may do so again.
Asked whether he would resign if Trump asked him to, Powell, who will have a year left in his second four-year term as Fed chair when Trump takes office, replied simply, “No.”
And Powell said that in his view, Trump could not fire or demote him: It would “not be permitted under the law,” he said.
Thursday’s Fed rate cut reduced its benchmark rate to about 4.6%, down from a four-decade high of 5.3%. The Fed had kept its rate that high for more than a year to fight the worst inflation streak in four decades. Annual inflation has since fallen from a 9.1% peak in mid-2022 to a 3 1/2-year low of 2.4% in September.
When its latest policy meeting ended Thursday, the Fed issued a statement noting that the "unemployment rate has moved up but remains low,” and while inflation has fallen closer to the 2% target level, it “remains somewhat elevated.”
After their rate cut in September — their first such move in more than four years — the policymakers had projected that they would make further quarter-point cuts in November and December and four more next year. But with the economy now mostly solid and Wall Street anticipating faster growth, larger budget deficits and higher inflation under a Trump presidency, further rate cuts may have become less likely. Rate cuts by the Fed typically lead over time to lower borrowing costs for consumers and businesses.
Powell declined to be pinned down Thursday on whether the Fed would proceed with an additional quarter-point rate cut in December or the four rate cuts its policymakers penciled in for 2025.