Egypt central bank expected to leave interest rates on hold

CAIRO: Egypt's central bank is expected to leave its overnight interest rates on hold on Thursday, a Reuters poll showed, although some analysts speculated recent interest rate declines at a state bank may indicate a rate cut.

Of 14 analysts polled, 10 forecast the Central Bank of Egypt (CBE) would leave rates unchanged at its regular monetary policy committee meeting. Four others expected a cut of 50 basis points.

The central bank chopped its benchmark rate by 300 bps in March and by another 50 bps in both September and November. The overnight lending rate is now 9.25% and the overnight deposit rate 8.25%, their lowest since July 2014.

"We don't think the CBE is in a rush to cut interest rates.

Uncertainty continues to engulf the global outlook amidst the pandemic's second wave," said Mohamed Abu Basha of EFG Hermes.

"Real rates are already in the sought target range of 2-3 percentage points and the central bank already cut by a sizable 400 bps (basis points) last year."

Still, some analysts expected a 50 bps cut, particularly after the state-owned National Investment Bank, a major buyer of treasuries, over the weekend reduced the yield on the investment certificates it offers to the public by up to 3.75 percentage points.

"It's a clear indication that liquidity is gaining more priority now. Lending growth has hardly picked up and deposits continue to rise at a strong pace," said Allen Sandeep of Naeem Brokerage. "Inflation is low enough to accommodate another cut."

Urban consumer price inflation slowed to 5.4% in December from 5.7% in November, the state statistics agency CAPMAS said, still below the central bank's target range of 6% to 12%.