05:24 PM
Thursday 20 February 2020
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I wrote – Shaima Hefzy:
Shuaa Investment Bank, “Shuaa Egypt Securities Trading,” expected that the central bank will fix interest rates during the meeting of the Monetary Policy Committee today, Thursday.
Shuaa said, in a report issued today, Thursday, that there are 3 reasons why keeping interest rates unchanged are the most likely scenarios, especially in light of concerns about the spread of Corona.
The Monetary Policy Committee of the Central Bank is holding its second meeting in 2020, in order to determine the fate of interest rates, amid the expectations of investment banks and bankers fluctuating between fixation and reduction, as the cuff tends more towards fixation.
This meeting comes after the committee fixed interest rates at its last meeting on January 16th, to end a continuous series of interest rates cut by 3.5% for 3 meetings during the second half of 2019.
The central bank had cut interest rates by a total of 4.5% four times over the past year, and the total reduction during the last two years had reached 6.5%, bringing interest rates closer to its level before floating, reaching 12.25% for deposit, and 13.25% for lending.
These three reasons are from the point of view of Ray:
1- Monthly inflation shows signs of rising:
Shuaa said that despite the expectation that the expected annual inflation readings will be in the usual course, which ranges between 6 and 8% during the current fiscal year, the basic consumer price index issued by the Central Bank rose for the second month in a row, which is a sign of the Central Bank to continue to stabilize Interest rate for the end of winter.
2- It is too early for the central to empty its stock:
The report believes that the central bank does not want to lose much of the flexibility of monetary policy early in the year while real interest rates are the lowest since May 2019.
Shuaa expects the central bank to cut interest rates by 200 basis points in 2020.
3- Other options for resuming the monetary easing process:
The Shuaa report believes that the central bank has options other than reducing interest rates to support the process of monetary easing, such as the decision to raise the proportion of installments to monthly income in relation to consumer loans.
The report pointed out that one of the options available to the Central to maintain the competitiveness of Egyptian debt instruments may be a possible reduction in the ratio of mandatory reserves for banks, allowing them to increase the volume of lending.
The expectations of investment banks varied about the decision expected from the central today, as investment banks Beltone, Varus, Shuaa, and HC expected the central bank to fix interest rates today, while Hermes and Prime investment banks expected a rate cut between 0.5 and 1%.
This meeting comes after the annual inflation rate of the total of the republic stabilized last January at the level of 6.8%, unchanged from the month of December, and rose slightly in the cities, recording 7.2%, compared to 7.1% in December 2019, according to the Central Agency for Public Mobilization. And the statistic last week.
This came after the monthly inflation rate returned to achieve positive numbers during January, recording 0.8%, after witnessing negative rates in November and December last, which is due to the rise in chicken prices by 11.7%, tomatoes by 21.3%, and eggplant 19.2%.
The central bank aims to reach an annual inflation rate of 9% (with an increase or decrease of 3%) on average, during the last quarter of 2020.
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