Shuaa Securities expects unchanged rates during February

CAIRO – 13 February 2020: “Keeping [interest] rates unchanged is a more likely scenario, especially in view of the global jitters in the wake of the coronavirus outbreak," Shuaa Securities said in a recent report.

However, the report expected a 200-basis point cut before the end of 2020.

The report clarified that the current underlying monthly price acceleration will be on the CBE’s radar screen when deciding on interest rates on February 20, noting that the Central Bank of Egypt’s (CBE) easing resumption may take other forms.

“We think easing could show up in other forms, similar to the CBE’s decision to raise the installment-to- income ceiling for consumer loans. We think the CBE has other ammunition, one of which is a possible cut in the required reserve ratio (RRR),” it noted.

As per the inflation rates, Shuaa reiterated its view that annual inflation readings in Egypt will range between 6-8 percent at normal times, expecting that pattern to prevail in most of the readings of the current fiscal year (FY2019/20).

“This is assuming no major surprises in terms of supply shocks for fruits and vegetables in particular.”

Egypt's statistics body announced earlier that the annual consumer price inflation recorded 6.8 percent in January 2020, compared to 12.2 percent in January 2019. On a monthly basis, inflation increased 0.8 percent in January, recording 105.2 points.

The report noted that January’s monthly inflation is the first positive monthly inflation reading since October 2019 and the second in five months, saying that causes are clearly visible in light of the upping witnessed in the food and non- alcoholic beverages group.

The Monetary Policy Committee of the Central Bank of Egypt (CBE) kept the overnight deposit rate, the overnight lending rate, and the rate of the main operation unchanged during January's meeting.

The overnight deposit rate, the overnight lending rate, and the rate of the main operation were kept at 12.25 percent, 13.25 percent, and 12.75 percent, respectively. Moreover, credit and discount rates downed to 12.75 percent.