Hermes: Interest rate likely to decline by 1 to 2% in 2019

CAIRO - 27 December 2018: EFG Hermes, a leading financial group and one of the biggest investment banks in Egypt, expected on Thursday the Central Bank of Egypt to lower interest rates by one to two percent in 2019.

The financial group also expected the average rate of inflation to stabilize at 14 percent, which will boost the national economy and push forward investment rates.

Head of Hermes research sector Ahmed Shams told MENA that the CBE is not likely to make any interest deductions during the first half of 2019 because of the developments in world markets.

The bank might mull a one or two percent cut of interest rate in the second half of 2019, he added.

Foreigners' exit from treasury bills will not place any pressure on the central bank because their money was not used in financing the trade balance deficit, he said.

Emerging markets worldwide were affected by an exit wave of foreign investments in government debt instruments during the second quarter of 2018 as the US dollar rose, raising fears from the economies of these markets, especially after the crises of Turkey and Argentina.

In the first quarter of 2018, Shams said foreigners' investments in treasury bills surmounted 23 billion dollars but they had no big effect on the Egyptian economy. This means that when 11 billion dollars of foreigners' investments in treasury bills exited at the end of the year, they also had no effect.

He said Egypt's foreign cash reserves hit 45 billion dollars in 2018, expecting the central bank to abandon its policy of increasing reserves in order to push forward investments