HC anticipates unchanged interest rates in Q4

CAIRO – 27 September 2018: HC Securities & Investment expected that Monetary Policy Committee (MPC) will keep rates unchanged in the fourth quarter of 2018, with anticipations that inflation will hit 14.8 percent from September to December.

HC clarified in a statement that CBE is expected to keep the rates at their levels due to the global high interest rate environment.

“August monthly inflation came in higher than our expectation of it, normalizing to c1 percent, mainly on higher fruit and vegetable price increases, and reflecting the second round effects of the energy price hikes, but they are still within the targeted CBE rate of 13 percent (+/-3 percent),” Equity Analyst – Macro & Banking Sector at HC, Monette Doss said.

“We expect the annual inflation rate to average 14.8 percent over September–December,” Doss added.

In August, Egypt’s annual consumer price inflation fell to 13.6 percent, compared to 33.2 percent in the same month of 2017.

The Central Bank of Egypt (CBE) announced that the country’s core inflation -excluding food and energy prices - rose to 8.83 percent in August from 8.54 percent in July.
Doss added that HC does not expect high interest rates offered by other emerging markets to reflect on higher corridor rates since attracting domestic liquidity is not the main target at the moment.

“In this regard, we note that local currency deposits grew 8.8 percent year to day (YTD) to LE 2.3 trillion in July, despite the maturity of the 18-month 20 percent certificates of deposit (CDs) that started to take place last May,” he added.

Banque Misr and National Bank of Egypt (NBE) announced in early September that a total of LE 176 billion of the 20 percent CDs have matured since May.

“However, based on July figures, it seems these deposits have not exited the banking sector, which makes higher rates aiming at attracting domestic liquidity unnecessary for the time being,” she noted.

“Contrary to our previous belief that the CBE would resume monetary policy easing in 4Q18, we now expect it to keep rates unchanged this last quarter, mainly due to the global high interest rate environment,” she added.