Analysis 9 factors pushing the central bank to reduce interest rates

The Monetary Policy Committee, The central bank of Egypt, Under the chairmanship of Tariq Amer, at its regular meeting to be held on Thursday, March 28, the debate on the fate of Interest rate In deposit and loan.

The Monetary Policy Committee bCentral Bank of EgyptUnder the leadership of Tariq Amer, last held on Thursday, February 14, the overnight deposit and lending rate and the central bank's benchmark rate of 100 basis points increased 1% to 15.75%. %, 16.75% and 16.25% respectively. And the price of credit and discount of 100 basis points from 1% to 16.25%.

The annual core inflation rate stood at 9.2% at the end of February, compared with 8.6% in January 2018 2018. The Consumer Price Index prepared by the Central Bank of India Egypt recorded a monthly rate of 1% in February, compared with 0.4% in January. The annualized rate of general inflation reached 14.4% in February, compared with 12.7% in January, and the CBM consumer price index reached 1.7% in February, compared to 0.6% in January 2019.

The Akhbar Al Youm portal provides readers with an analysis of the trends of the Monetary Policy Committee of the Central Bank of Egypt. Interest rate In deposit and loan.

There are 9 factors that can lead to central bank Reduction Interest rate From 0.5% to 1%, ie the improvement of the exchange rate of the Egyptian pound against foreign currencies, especially the US dollar, which lost about 54 piastres of value compared to the Egyptian pound since the beginning of the year, where the record The price of the dollar 17.78 pounds to buy 17.88 pounds for sale, while the day has recorded 17.24 pounds at the purchase and 17.34 pounds for sale.

The second factor was the increase in Egypt's credit rating to B + with a stable outlook from Fitch Ratings. central bank, The target inflation rate resulting from temporary shocks on the supply of some fresh vegetables, the Central Bank thus achieved the target inflation rate of 13% (± 3%) for 2018, announced in May 2017 for the first time in its history. With an inflation rate of 9% (± 3%) in the fourth quarter of 2020.

The real GDP growth rate is the fourth factor of 5.5% in the fourth quarter of 2018 and the unemployment rate has fallen to 8.9% from 10% at the lowest level since December 2010, the fifth factor being drive to central bank To reduce Interest rate In deposit and loan.

The stability of the interest rate in US dollars could result in a reduction Interest rateAs a sixth factor, and the desire to accelerate economic growth and achieve the growth indicators agreed with the IMF, the seventh factor and the eighth factor is the desire to reduce the cost of public debt interior.

The earlier announcement by the Central Bank of Egypt that medium-term price stability could pave the way for a narrower cut in interest rates, Factor IX.

Although there are 4 reasons, this can lead to central bank The interest rate will be stabilized by the end of Ramadan, accompanied by higher prices for commodities and products, and therefore an expected rise in inflation rates, as well as the desire to maintain the momentum of foreign investment flows in the local government securities market. In order to avoid inflationary pressures, especially in order to liberalize energy prices, in accordance with the timetable agreed with the International Monetary Fund in the second half of this year, especially with the recovery of prices global oil again.

C & # 39; was Tariq Amer Governor of the Central Bank of Egypt, previously confirmed to "Gate News Today" that the decision to reduce Interest rate At the first meeting of the Monetary Policy Committee of the Central Bank, the positive effects in Egypt and outside of Egypt, as well as the bold decisions taken by the Central Bank, testify to the confidence and strength of the economic results, as well as reform measures taken at the monetary policy level in previous periods. He stressed the existence of a methodology and a program rented by the international financial institutions, in particular the International Monetary Fund, especially after the decision to liberalize the exchange rate.

I was waiting Beltone Financial In his report, reduced central bank At the interest rate between 50 and 100 basis points to 1% at the next monetary policy committee meeting, stressing that high inflation reading does not represent a risk to the prospects of the future. Inflation, which is in line with its vision of containing inflationary pressures during the first half of 2019, Reduce interest rates again in the first half of 2019, before the application of the automatic pricing mechanism for products. oil.

She pointed out that the persistence of favorable global conditions given the tightening of monetary policy supported the completion of the monetary policy of the Central Bank of Egypt and that, given the lack of factors of assistance taken into account in the change of the base year, inflation levels are expected to increase from December 2018, post the inflation target of less than 10% for 2021.