HC Securities expects interest rate cut in next MPC meeting

CAIRO – 27 March 2018: Investment bank HC Securities and Investment expects a 100 basis points cut in interest rates in the Central Bank of Egypt’s (CBE) Monetary Policy Committee (MPC) meeting on Thursday, March 29, a statement from HC said.

This comes on the back of cooling inflation, which stood at 14.4 percent in February, close to the 13 percent target set by the CBE for the last quarter of fiscal year 2017/18.

HC economist Sara Saada said that the decline in inflation was the main driver behind the CBE’s decision to cut interest rates last month for the first time since flotation.

In MPC’s last meeting in February, the bank cut the overnight deposit rate to 17.75 percent from 18.75 percent, and lowered the overnight lending to 18.75 percent from 19.75 percent.

Saada added that despite of an expected cut in energy subsidies in July, which will lead to a one-off increase in inflation rate, she does not see it as a reason to stop the expansionary monetary policies in the current period.

She stressed on the importance of continuing these policies to encourage investment, leading to a more sustainable growth.

Egypt's annual urban inflation fell for the seventh consecutive month to 14.4 percent in February from 17.1 percent in January, the lowest since October 2016.

The flotation of the Egyptian pound accompanied with fuel subsidy cuts in late 2016 has sent inflation to a record high of 33 percent in July 2017, but is started easing gradually afterwards.