Beltone Financial expected the Central Bank of Egypt (CBE), through the Monetary Policy Committee (MPC), to cut interest rates on the pound by about 100 basis points at the committee’s meeting scheduled for 17 May.
According to a report by the company’s research department, the annual headline inflation rate continued its downward trend in April this year, falling from 13.3% in March to 13.1%, in line with the company’s projections of 13%, supported by food prices falling from 11.8% in March 2018 to 11.1%.
The report added that, on an annual basis, most items remained almost unchanged, excluding the prices of clothing and footwear that rose by 5.6% in the summer season. Meanwhile, monthly core inflation continued climbing, rising to 1.5% from 1% in March 2018, also in line with the company’s projections of 1.4%. This move was stimulated by food price inflation going up from 1.8% to 2.4% as demand increased during and before the Easter holiday season.
Beltone expects a larger rise in inflation on a monthly basis over the next two months, with the advent of Ramadan and Eid.
“We reiterate our view of an interest rate cut by 100 basis points, as the government seems more capable of absorbing inflationary pressures so far. We still believe in another interest trim before the end of the fiscal year 2017/2018 prior to reducing subsidies,” the report stated.
“Yet, we also affirm our vision for a stable return on treasury bills, as companies and local banks provide the liquidity required to keep foreign investment balanced.”
Finally, the report noted that despite rising interest rates in emerging markets, especially in Argentina, Egypt’s strong outlook and exchange rate stability justify the continued opportunity to invest in fixed income instruments, especially with local currency rivalries.