Thursday, December 5, 2013

Egypt surprises by cutting rate 50 bps to 8.25 pct

    Egypt's central bank cut its benchmark overnight deposit rate by another 50 basis points to 8.25 percent, its third rate cut in a row.
    The Central Bank of Egypt (CBE) also cut its other main rates, the overnight lending rate, the rate on its main operation and the discount rate by 50 basis points to 9.25 percent, 8.75 percent and 8.75 percent, respectively.
    A statement by the CBE's monetary policy committee would be issued later, the bank said.
    The CBE has now cut its rates by 100 basis points this year. In March the CBE raised rates due to inflationary pressures but then reversed course and cut rates in August and September.
    Economists had expected the central bank to keep rates steady this month in light of a rise in inflation in October to 10.44 percent from 10.15 percent the previous month.

    The central bank has also been under pressure to keep rates high in order to attract capital and not deplete its foreign currency reserves which the central bank on Wednesday said fell slightly in November from $18.59 billion at the end of October.
   The reserves have also been under pressure since the uprising in 2011 that toppled President Hosni Mubarak. At that point reserves were $36 billion.
    Political instability since then has led to a drop in tourism and made investors nervous.
    Egypt's Gross Domestic Product rose by an annual 1.5 percent in the second quarter, down from 2.2 percent in the first quarter. 


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