Egypt’s central bank plans to cut rates as inflation eases

CAIRO: Egypt’s central bank is likely to start a gradual easing of monetary policy in its meeting on Thursday, a Reuters poll showed on Tuesday, as inflation hit its lowest level since the country floated its currency.

The Egyptian pound lost half of its value and prices shot up after Egypt floated the currency in November 2016 to secure a $12 billion International Monetary Fund deal to revive its economy. Eight out of 10 economists polled by Reuters said the bank on Thursday will cut the deposit and lending rates, currently at 18.75 and 19.75 per cent.

Six economists said the bank would cut the rates by 100 basis points while two said it would cut by half of that. “We see a rate cut this quarter as justifiable and a necessary signal of lower inflation,” said CI Capital senior economist Hany Farahat. He expected a cut of 50 basis points.

Annual urban consumer price inflation eased to 17.1 per cent in January from 21.9 per cent the previous month, while annual core inflation, which strips out volatile items, fell to 14.35 per cent from 19.86 per cent.

Inflation had jumped to a record high of around 35 per cent in July after the country hiked energy prices, but it has eased since.

The IMF said in a report last month it expected inflation to fall to 12 per cent by June and to single digits by 2019. -