Egypt Central Bank may hold rates this month: Capital Economics

10/09/2018 Argaam

 

Capital Economics expects that the Central Bank of Egypt (CBE) will keep interest rates unchanged at its MPC (Monetary Policy Committee) meeting due this month-end, due to high inflation and recent sell-off in emerging markets.

 

“The rise in Egyptian inflation to 14.2 percent y/y last month, coupled with the backdrop of the recent sell-off in EM financial markets, means that the central bank will probably leave interest rates unchanged (rather than cut them) at this month’s MPC meeting,” Capital Economics forecast on Monday.

 

Egypt’s headline inflation rate increased from 13.5 percent yoy in July to 14.2 percent y/y in August, leaving inflation comfortably within the central bank’s target of 13 percent (±3 percent) for the end of this year, the report noted.

 

“While the CBE’s credibility has improved in recent years, it is fragile and the MPC will probably not want to lower rates at a time when the latest data show inflation rising,” it said, adding, “Moreover, past experience suggests that the backdrop of the recent sell-off in EM financial markets will also prompt the CBE to hold fire.”

 

While expecting inflation to fall over the coming months, Capital Economics also anticipates rates to be lowered substantially over the next couple of years.

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