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AlwaysFree: Egypt’s Central Bank Is Predicted To Keep Main Interest Despite Worsening Inflation

Author: SSESSMENTS

The central bank of Egypt (CBE) is expected to keep the main interest steady despite inflation worsening in May and further economic contraction. 16 from 17 analysts projected the central bank will keep steady rates while one analyst predicted a 100 basis points cut. The current rate has been on hold after two meetings since March, when the rate is cut by 3%.   

The overnight deposit rate is at 9.25% while overnight lending rate is 10.25%, the lowest rates since 2016 before the country was backed by the IMF programme. The inflation trend is considered beneficial in the short term, while further cuts will not help much in this economic situation. Egypt’s official statistics agency CAPMAS said that annual urban consumer inflation is decreasing from 5.9% in April to 4.7% in May while core inflation fell from 2.5% in April to 1.5% year-on-year in May. 

Even with IMF support since three years ago, the external situation is facing uncertain capital flow and rising current account deficit. Analysts said that there is a need to keep the attractiveness for foreign investors and support the EGP (Egyptian pound currency). The IMF has approved a $2.77 billion package to help Egypt the gap of payments balance last month, and is scheduled to take into account another $5.2 billion financing under stand-by arrangement . 

Egypt's tourism industry, representing between 5%-15% of GDP, has shut down since mid-March. The 15% rate included the indirect jobs, investment and spending affected by the collapsing of tourism sectors.

Tags: Africa,All Products,AlwaysFree,Egypt,English

Published on June 26, 2020 7:08 AM (GMT+8)
Last Updated on June 26, 2020 7:08 AM (GMT+8)