The Central Bank of Egypt (CBE)’s Monetary Policy Committee (MPC) will hold its third periodic meeting in 2020 on Thursday to discuss the fate of its core interest rates, the most prominent indicator of the Egyptian Pound’s interest rate trends in the short term.
The committee’s meeting comes amid strong expectations that the bank will keep rates unchanged. This follows its sudden 3% reduction at an exceptional meeting held by the CBE on 16 March, with the overnight lending rate now standing at 10.25%, the overnight deposit rate at 9.25%, and the discount and main operation rates at 9.75%. The rates are the lowest since early 2016.
The CBE said this step comes in light of global developments and the consequent movement to preserve the Egyptian economy’s gains since the launch of the national economic reform programme. It is also to preserve the proactive steps the CBE takes in exceptional circumstances.
According to the MPC, reducing rates was an exceptional measure to support economic activity in all sectors. The measures take into account the future expectation of inflation and its consistency with the CBE target of 9% (±3%) in the fourth quarter of 2020.
Radwa Al-Swaify, Head of Research at Pharos Holding, expects the stabilisation of the basic rates, especially after the 300 basis points reduction in March.
She noted that before the MPC takes any new decision on interests, it will first take into account different market conditions, the effect of the recent rate cut, and inflation trends.
Monit Doss, macroeconomic and banking sector analyst at HC Securities and Investment, expects the CBE to keep interest rates unchanged in its Thursday meeting. This would be despite low inflation in February, as she also expects inflationary pressures to return over the coming months due to increased purchasing rates of food and commodities during the curfew in Egypt, the upcoming month of Ramadan, and the possible shortage of supplies due to long-term closures.