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Economists and investment banks predicted that the central bank would continue to set interest rates at the next meeting of the Monetary Policy Committee on August 22.
Expectations are based on a number of factors, including the inflationary effects of higher fuel and electricity prices in early July, which will emerge over the next two months, and the need to demonstrate caution to the extent that inflation has not stabilized so far, according to international reports.
On July 11, the Central Bank of Egypt (CBE) decided to set for the third time in a row the deposit and lending rates at 15.75% and 16.75%.
The meeting of August 22 will be the fifth since the beginning of the year 2005. Interest rates have been set for the last 3 meetings at 15.75% for deposits and at 16.75% for loans, after 1% reduction on February 14, 2019.
The stabilization outlook comes despite the Federal Reserve's decision to cut interest rates by 25 basis points at its last meeting last week, opening the door for emerging-market central banks to cut rates.
Ahmed Abdel Ghani, a financial badyst in an Egyptian government bank, predicted that the central bank would stabilize interest rates at current levels without taking any measures to reduce interest rates at the present time.
He emphasized that the importance of stabilizing interest rates stems from the early effects of the government's decision to increase fuel and electricity prices on the price movement in August, which means a new rise in the inflation index.
The Egyptian government raised petroleum product prices from 16% to 30% at the beginning of last month, the same month starting to calculate the electricity bill at the new prices announced in May after the rise.
The decision to increase fuel prices is the factor that most affects the inflation rate, as they directly affect the rise in transport prices and then affect the prices of various commodities.
The recent IMF report on Egypt underscored the need to be cautious about inflation, which will be affected by the decision to reduce support allocations, stressing that the central bank should remain cautious until the end of the crisis. Inflation stabilizes, as well as the ongoing flexibility of the exchange rate to strengthen resilience to shocks and maintain competitiveness.
He added that the central bank would not be able to cut rates before the start of the last quarter of 2019, which could be between 15 and 100 basis points, and that it could better contain the $ 1 billion interest rate. inflation and reach about 10% in the fourth quarter of 2019.
"The sudden drop in the inflation index last month has blurred the expectations of badysts and economists about the future interest rate," said Mohamed Kotb, head of the management of financial badets at Fleet Financial Investments. The central bank continued to tighten interest rates at its meeting.
According to data from the central bank, the basic annual inflation rate fell from 7.8% in May to 6.4% in June, while it was 13.2% in May, at 13.9%, compared to 8.9% in June. Central Agency for Public Mobilization and Statistics.
The head of the financial badet management sector has suggested that the central bank starts lowering interest rates from October to 2% and that it continues to lower interest rates. interest at a similar rate in the first quarter of 2020.
He stressed the importance of reducing interest rates in order to reduce the cost of corporate borrowing from banks and encourage investment, as well as to activate the Egyptian capital market, which had suffered heavy losses since then. several months.
In a research note, the investment bank Pharos pointed out that the chances of reducing interest rates at the next meeting of the central bank are still low, despite the reduction in interest rates in the US market, because of the impact of the decision to reduce support for the inflation index.
Faros predicted that inflation would continue to rise during the two months due to inflation, which would coincide with the return to the school season and rising tuition fees.
This article is expected to confirm the interest rate of the Egyptian Central Bank for the fourth time. It does not in any way derive from the site of Yemen Arab and in no way reflects the policy of the website or the point of view of it.
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