By: Heba El-Kordy
Cairo – Mubasher: The Central Bank of Egypt (CBE) is likely to ease interest rates to range between 2% and 3% in 2019, according to a poll conducted by Mubasher.
Inflation rates are also expected to average between 13% and 15% in the next year, the opinion poll indicated.
The Central Agency for Public Mobilization and Statistics (CAPMAS) previously announced that the North African nation’s annual inflation declined to 15.6% year-on-year in November from 26.7%.
The consumer price index (CPI) inched down 0.7% month-on-month, recording 309.1 points last November, the state-run statistics agency's data showed.
CBE meeting
The CBE is likely to keep interest rates unchanged during its board meeting next week although inflation rates fell below expectations last November, analysts told Mubasher.
Interest rates are projected to remain unchanged at its current levels, Mohamed Abu Basha, head of macroeconomic analysis at EFG Hermes Research said.
The meeting of the CBE’s Monetary Policy Committee (MPC) is set to be held on Thursday, 27 December to discuss interest rates.
Overseas investments in Egyptian treasury bills (T-bills) dropped to EGP 210.2 billion ($11.7 billion) last month, versus EGP 234.5 billion ($13.1 billion) in September, the CBE previously stated.
Abu Basha noted that the central bank may maintain the same interest rates until the last quarter of 2019, taking in consideration that the government would carry over into cutting fuel subsidies.
Some economists and analysts expected the CBE to begin easing interest rates as of the first quarter of the coming year to an average between 2% and 3%.
For his part, senior economist at CI Capital Hani Farahat projected the CBE to resume its quantitative easing policy by Q1-19, expecting benchmark interest rates to drop to 3% next year.
Moreover, Ahmad Shams El Din, head of research at EFG Hermes, said that Egypt’s interest rates are likely to fall by around 2% in 2019.
Meanwhile, the London-based economic research consultancy Capital Economist forecast the most populous Arab country’s interest rates to slash to 11.25% by the end of 2019.
Inflation
Despite the decline in monthly inflation last November, the inflation rate is expected to remain stable between 13% and 15% due to the anticipated government decisions on subsidies.
These decisions are set to be made by the Egyptian government in the first half of the next year.
At the level of inflation, Abu Basha said that it may average between 14% and 15% in 2019 if oil prices record approximately $70 per barrel (pb).
Inflation rates would slump in case oil prices fall below the aforementioned price, he pointed out.
Egypt plans to ease fuel subsidies to EGP 89.075 billion in fiscal year 2018/2019, against EGP 110.148 billion in FY17/18, a government document previously showed.
The CBE stated last week that Egypt’s annual core inflation eased to 7.94% month-on-month in November from 8.86%.
The central bank had to raise interest rates following the libralistation of exchange rate three times in November 2016 by a combined 7%, or at 3% in November 2016, 2% in May 2017, and 2% in July 2017.
Translated by: Mai Ezz El-Din
