Egypt leaves rates on hold and lowers inflation target

     Egypt's central bank left its key interest rates on hold after cutting them three times this year, most recently in November, saying this decision was consistent with achieving its new and lower inflation target for the end of 2022.
     The Central Bank of Egypt (CBE) kept its overnight deposit rate, the overnight lending rate and the rate on its main operation unchanged at 8.25 percent, 9.25 percent, and 8.75 percent, respectively, along with the discount rate at 8.75 percent.
     CBE has already cut its interest rates three times this year by a total of 400 basis points following cuts in March, September and November. 
     Since February 2018, when CBE began its monetary easing cycle in response to decelerating inflation, the key interest rates have been cut by a total of 10 percentage points.

     Egypt's inflation rate has been trending lower since hitting 33 percent in July 2017 though it has ticked up in recent months to 5.7 percent in November, the third month of acceleration, pushed up by what CBE said was a higher prices on some food items, for example tomatoes.

     But annual core inflation only rose to 4.0 percent in November from 3.9 percent and CBE said headline inflation is increasingly likely to fall below the lower bound of its target range of 6.0 percent.

     The central bank lowered its inflation target to 7.0 percent, plus/minus 2 percentage points, on average during the fourth quarter of 2022, down from its previous target of 9.0 percent, plus/minus 3 percentage points.

     Inflation targets are used by central banks to anchor inflation expectations and CBE noted exogenous shocks outside the scope of monetary policy may lead to transitory deviations of inflation from the target.

     Egypt's economy was hit hard by the Arab Spring in 2011 as it scared off foreign tourists and investors, resulting in a persistent shortage of foreign currency and declining foreign exchange reserves, which then made it increasingly difficult for the central bank to defend the value of the pound.

     A new central bank governor, Tarek Amer, took over CBE in November 2015and quickly began a major overhaul of the bank's policy by devaluing the pound by 12 percent in March 2016 and reforming the foreign exchange market to preserve U.S. dollars and attract funds from abroad.

      Later that year Egypt and the International Monetary Fund (IMF) reached a deal to shore up the government's reform program aimed a boosting economic growth and improving the fiscal situation.

     As part of a $12 billion agreement with the IMF, the pound was floated in November 2016 and immediately lost half of its value, boosting inflation and triggering rate hikes to curb inflation.

     But since December 2016 Egypt's pound has steadily appreciated though it fell sharply in March this year as most other currencies worldwide, during the COVID-19 crises. 

     Today the pound is trading at 15.69 to the dollar, up 2.3 percent since the start of this year.

     As other countries, Egypt's economy was hit by the pandemic and in June the IMF approved a US$5.2 billion loan to help it meet its balance of payment needs and the budget deficit.

      After shrinking by an annual 1.7 percent in the second quarter, Egypt's economy bounced back and expanded by a 0.7 percent in the third quarter, the bank said, adding the unemployment rate had declined to 7.3 percent, the lowest on record, down from 9.6 percent in the second quarter.

     "Most demand side leading indicators for October and November 2020 show continued signs of recovery after displaying weakness during 2020 Q2," CBE said.

     In the last financial year 2019/20, which ended June 30, Egypt's economy slowed to growth of 3.6 percent from 5.6 percent the previous year.

This week in monetary policy: China, Paraguay, Thailand, Turkey and Egypt

     This week - December 21 through December 26 - central banks from 5 countries or jurisdictions are scheduled to decide on monetary policy: China, Paraguay, Thailand, Turkey and Egypt.
    Following table includes the name of the country, the date of the next policy decision, the current policy rate, the local time a policy decision is announced, the result of the last policy decision, the change in the policy rate year to date, and the rate one year ago.
    The table is updated when the latest decisions are announced and can always be accessed by clicking on This Week.
 

WEEK 52
DEC 21 - DEC 26, 2020:
CHINA	21-Dec	3.85%		0	-30	4.15%	EM
PARAGUAY	21-Dec	0.75%		0	-325	4.00%
THAILAND	23-Dec	0.50%		0	-75	1.25%	EM
TURKEY	24-Dec	15.00%	14:00	475	300	12.00%	EM
EGYPT	24-Dec	8.25%		-50	-400	12.25%	EM

   

 www.CentralBankNews.info 

Egypt cuts rate 2nd time in 2020, inflation below target

     Egypt's central bank cut its key interest rates for the second time this year, saying recent data showed inflation expectations were declining so a reduction in the policy rate would support economic activity while still remaining consistent with achieving price stability.

     The Central Bank of Egypt (CBE) cut its overnight deposit rate, its overnight lending rate and the rate on its main operation by 50 basis points each to 8.75 percent, 9.75 percent and 9.25 percent, respectively.

     The discount rate was cut 50 basis points to 9.25 percent.

     It is CBE's second rate cut this year after a 300 basis-point cut at an unscheduled monetary policy meeting on March 16 with the result that rates have been cut by a total of 350 basis points this year.

     Since February 2018, when CBE began easing its monetary policy stance in response to lower inflationary pressures, key interest rates have been cut by a total of 10 percentage points.

     Egypt's inflation rate dropped to 3.4 percent in August, the second lowest rate seen in almost 14 years after October 2019 and down from 4.2 percent in July, with CBE saying this continues to reflect "muted" inflationary pressures.

     This month annual core inflation is expected to be affected by unfavorable base effects due to the change in the consumer price index but CBE confirmed it still it expects average annual inflation to hover around the lower bound of its inflation target of 9 percent, plus/minus 3 percentage points in the fourth quarter of this year.

     Preliminary data shows that Egypt's economy expanded 3.5 percent in the 2019/20 fiscal year, which ended June 30, down from 5.6 percent in the previous year while the unemployment rate jumped to 9.6 percent in the second calendar quarter from 7.7 percent in the first quarter due to the impact of COVID-19 on the economy.

     "However, the stability of some leading indicators in August and July after signs of improvement in June point to a gradual recovery in economic activity," CBE said.

This week in monetary policy: New Zealand, Rwanda, Belarus, Serbia, Uganda, Egypt, Mexico & Peru

    This week - August 9 through August 15 - central banks from 8 countries or jurisdictions are scheduled to decide on monetary policy: New Zealand, Rwanda, Belarus, Serbia, Uganda, Egypt, Mexico and Peru.

    Following table includes the name of the country, the date of the next policy decision, the current policy rate, the result of the last policy decision, the change in the policy rate year to date, and the rate one year ago.

    The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.

WEEK 33
AUG 9 - AUG 15, 2020:
NEW ZEALAND	12-Aug	0.25%	0	-75	1.00%	DM
RWANDA	12-Aug	4.50%	-50	-50	5.00%
BELARUS	12-Aug	7.75%	-25	-125	9.50%
SERBIA	13-Aug	1.25%	0	-100	2.50%	FM
UGANDA	13-Aug	7.00%	-100	-200	10.00%
EGYPT	13-Aug	9.25%	0	-300	14.25%	EM
MEXICO	13-Aug	5.00%	-50	-225	8.00%	EM
PERU	13-Aug	0.25%	0	-200	2.50%	EM

 

    www.CentralBankNews.info

Egypt maintains rate to meet inflation target

     Egypt's central bank left its key interest rates unchanged for the second time and reiterated its view that keeping rates steady is consistent with achieving its inflation target of 9 percent, plus/minus 3 percentage points in the fourth quarter of this year.
     The Central Bank of Egypt (CBE) left its overnight deposit rate at 9.25 percent, the overnight lending rates at 10.25 percent, and the rate on its main operation and discount rate at 9.75 percent.
     CBE's monetary policy committee added its decision to maintain rates reflected the 300 basis point rate cut at an unscheduled policy meeting on March 16. 
     At its previous monetary policy meeting on April 2 CBE also maintained rates, saying this was consistent with achieving its inflation target.
      Since February 2018, when CBE began easing its policy as inflationary pressures began to subside, key interest rates have been cut by 9.50 percentage points.
     Egypt's inflation rate rose to 5.9 percent from 5.1 percent in March, with CBE saying this was due to unfavorable base effect from muted prices increases last year and higher prices in April 2020 due to the outbreak of COVID-19 and Ramadan.
     The pickup in inflation led analysts to expect CBE to keep rates steady today.
     Egypt's tourism sector has been hit hard by the spread of the coronavirus and CBE said leading indicators reflected a slowdown in March and April following a broad improvement in January and February.
     "Nevertheless, the diversity of the economy provides some cushion given the resilience of some sectors," CBE said.
     On Monday the International Monetary Fund's (IMF) executive board approved assistance of US$2.77 billion so Egypt can meet its urgent balance of payment needs from the pandemic.
     "The pandemic and global shock pose an immediate and severe economic disruption that could negatively impact Egypt's hard-won macroeconomic stability if not addressed," IMF said.

Egypt maintains rates after earlier emergency cut

     Egypt's central bank left its benchmark interest rates steady, saying this would be consistent with achieving its inflation target following the 300 basis point rate cut at an unscheduled monetary policy meeting on March 16.
     The Central Bank of Egypt (CBE) left its overnight deposit rate at 9.25 percent, the overnight lending rates at 10.25 percent, and the rate on its main operation and discount rate at 9.75 percent.
     The decision was largely expected by analysts, with Egypt's inflation rate easing to 5.3 percent in February from 7.2 percent in January on favorable base effects and contained inflationary pressures, CBE noted.
     CBE targets inflation of 9 percent, plus/minus 3 percentage points in the fourth quarter of this year and price stability over the medium term.
     Egypt's tourism sector has been hit hard by the spread of the coronavirus and the associated containment measures worldwide and CBE said its rate cut on March 16 was a pre-emptive move to support economic activity, especially within households and businesses, and support employment, which is "essential in order to avoid a prolonged slowdown in economic activity and help speed the recovery once the outbreak is contained."
     Egypt's economy grew 5.6 percent in the third quarter of 2019 year-on-year, down from 5.7 percent in the second quarter.

Egypt cuts rates 300 bps to support economy from virus

     Egypt's central bank cut its benchmark interest rates by 300 basis points to support economic activity given the current "challenging external environment" while the outlook for inflation remains consistent with reaching the inflation target.
     The Central Bank of Egypt (CBE) cuts its overnight deposit rate, the overnight lending rate, the rate on the main operation and the discount rate to 9.25 percent, 10.25 percent, 9.75 percent and 9.75 percent, respectively.
      The rate cut, taken at an unscheduled meeting by the monetary policy committee, is the first by CBE since November 2019 when it paused after cutting rates six times and by a total of 650 basis points since February 2018.
      Including today's rate cut, CBE has now cut its rate by 950 basis points in two years.
      Egypt's inflation rate eased to 5.3 percent in February from 7.2 percent in January, and CBE targets inflation of 9.0 percent, plus/minus 3 percentage points by the fourth quarter of 2020.

Egypt maintains rates to achieve inflation target

     Egypt's central bank left its key interest rates unchanged for the second consecutive month, saying it had lowered its rates by 350 basis points during the second half of last year and keeping them steady remains consistent with achieving its inflation target and supporting lower inflation in the medium term.
     The Central Bank of Egypt (CBE) left its overnight deposit rate, the overnight lending rate, the rate of the main operation and the discount rate steady at 12.25 percent, 13.25 percent, 12.75 percent and 12.75 percent, respectively.
     The decision to maintain rates was expected by roughly half of analysts' surveyed as CBE was not considered to be in any rush to lower rates while inflation is picking up.
     CBE has cut its rate six times and by a total of 650 basis points since February 2018, including four cuts of 450 basis points in 2019. From August through November the rate was cut 350 points.
     Egypt's headline inflation inched up to 7.2 percent in January from 7.1 percent in December, mainly due to higher food prices such as poultry and fresh vegetables, while core inflation rose to 2.7 percent from 2.4 percent.
      Despite this recent uptick, inflation still remains well below CBE's target of 9.0 percent, plus/minus 3 percentage points, for the fourth quarter of 2020.
     CBE said its monetary policy was still supporting private domestic demand, which has outpaced exports as the main driver of economic activity in the first three quarters of last year, driven by growth in private investments.
     Egypt was hit hard by the Arab Spring in 2011, which ended Hosni Mubarak's 30-year rule, as it scared off tourists and foreign investors, resulting in a persistent shortage of foreign currency.
     But helped by the appointment of Tarek Amer as CBE governor in November 2015 - he reformed the banking system and the foreign exchange market - and a 2016 agreement with the International Monetary Fund (IMF), Egypt's economy has rebounded.
     Egypt's gross domestic product grew an annual 5.6 percent in the third quarter of last year, slightly down from 5.7 percent in the second quarter but up from 5.5 percent in the year ago quarter.
     "However, disruptions to global economic activity following the recent coronavirus outbreak could weigh on the global economic outlook, at least in the near term," CBE said, adding oil prices have declined from lower demand but still remain volatile due to geopolitical risks.
     Since January last year the Egyptian pound has steadily appreciated, with its rise accelerating this month. 

     Today the pound eased after the policy decision to trade at 15.57 to the U.S. dollar to be up 2.8 percent since the start of this year and some 22 percent since the pound lost about half its value in the wake of the decision to float the pound in November 2016.
     The collapse in the pound in 2016 boosted inflation to 33 percent in July 2017 and CBE quickly raised its key interest rate by 400 basis points that year to curb the pass-through of higher import prices to overall inflation.
    After the initial surge in inflation, it began decelerating in the second half of 2017 and fell to 3.1 percent in October last year - the lowest since December 2005 - before picking up speed in the last three months.

Egypt pushes monetary policy meeting to Jan. 16

    Egypt's central bank changed the date of its monetary policy meeting scheduled for Dec. 26 to Jan. 16, 2020 saying this would be "after the approval of the formation of the Board of Directors and the Monetary Policy Committee for the new term."
     On Nov. 28 Egypt's parliament approved the re-appointment of Tarek Amer for his second and final 4-year term as governor of the Central Bank of Egypt (CBE), only weeks after a reshuffle of the bank's board with one deputy governor reappointed, another one replaced and the appointment of three new board members.
     Amer took over CBE in November 2015 following the resignation of Hesham Ramaz and has been credited with reforming and modernizing the country's banking system. This year he won the African Banker Award as best governor and was also named as one of the top 21 governors in the world in 2019 by Global Finance magazine.
    Egypt's economy was hit hard by the Arab Spring in 2011, which ended Hosni Mubarak's 30-year rule, as it scared off foreign investors and tourists, resulting in persistent currency shortage.
    As CBE's reserves continued to dwindle, the Egyptian pound came under attack but CBE was resistant to devalue to avoid sparking inflation, hitting the country's poor.
     But after taking over CBE, Amer soon began to overhaul its policy, devaluing the pound by 12 percent in March 2016 and began a major reform to the foreign exchange market to preserve dollars and attract funds from abroad.
      Shortly after Egypt and the International Monetary Fund (IMF) began talks to shore up the government's economic reform program that was aimed at boosting economic growth, lowering budget deficit and debt, improving the foreign exchange market and strengthening the social safety net.
      As part of the 3-year, $12 billion agreement, which included the roll back of government subsidies and the introduction of value-added tax, Amer then floated the pound in November 2016.
      The pound immediately lost about half its value, boosting inflation to 33 percent in July 2017 with the result CBE raised its key interest rates by 400 basis points that year to curb the pass-through of higher import prices to overall inflation.
      After the initial shock, inflation decelerated during the second half of 2017 but remained high the following year, boosted by the rise in prices as subsidies were rolled back. As a result CBE only lowered its rate 200 basis points in 2018.
      By early 2019 the Egyptian pound began to rise and by June headline inflation finally fell below 10 percent for the first time in 3 years, paving the way for CBE to begin a more aggressive easing.
      So far this year CBE has cut its rates four times, most recently in November, by a total of 450 basis points, and analysts had expected another cut today in light of the steady decline in inflation.
     Due to base effects, inflation rose to 3.6 percent in November from 3.1 percent in October and is expected to rise in December but still remain below CBE's inflation target of 9.0 percent, plus/minus 3 percentage points, in the fourth quarter of 2020.
     Egypt's pound was trading around 16 to the U.S. dollar today, up 11.9 percent this year.
     CBE's four main interest rates - the overnight deposit rate, the overnight lending rate, the rate on its main operation and the discount rate - currently stand at 12.25 percent, 13.25 percent, 12.75 percent and 12.75 percent, respectively.

     www.CentralBankNews.info
     
   
   

Egypt cuts rate 4th time in 2019 as inflation eases

    Egypt's central bank lowered its key interest rates for the fourth time this year as underlying inflationary pressures continue to ease, with the recent easing providing "appropriate" support to economic activity while remaining consistent with achieving the inflation target.
     The Central Bank of Egypt (CBE) cut its overnight deposit rate, the overnight lending rate, the rate on its main operation and the discount rate by 100 basis points each to 12.25 percent, 13.25 percent, 12.75 percent and 12.75 percent, respectively.
     CBE has now cut its benchmark overnight rate by 450 basis points this year following earlier cuts in February, August and September. Since February 2018 the rate has been cut by 650 points when it moved into an easing cycle in response to slowing inflation.
     Egypt's inflation rate dropped to 3.1 percent in October, the lowest since December 2005 according to Reuters, from 4.8 percent in September, cementing expectations of today's rate cut.
     Inflation surged to 33 percent in July 2017 after the Egyptian pound was floated in November 2016 as part of a $12 billion agreement with the International Monetary Fund (IMF) that included a rollback of fuel subsidies and the introduction of value-added-tax.
     CBE said its rate cuts were consistent with reaching the inflation target of 9.0 percent, plus/minus 3 percentage points, in the fourth quarter of 2020.
     The fall in inflation was driven by lower food prices along with favorable base effects from a transistor shock to fresh vegetable prices last year.
     Egypt's economy was hard hit by the Arab Spring in 2011 but has been steadily improving since 2016 and CBE said growth had stabilized, with gross domestic product rising 5.6 percent in the third quarter of this year, down from 5.7 percent in the second quarter but steady from 5.6 percent in the first quarter.

Egypt cuts rate 100 bps as inflation continues to decline

    Egypt's central bank cut its key interest rates by another 100 basis points and reiterated its guidance that the pace and magnitude of future changes will continue to be based on inflation expectations that are anchored at target levels that are consistent with disinflation and price stability.
     The Central Bank of Egypt (CBE) has now cut its benchmark overnight deposit rate policy by 350 basis points this year following cuts in February and August, and by 550 points since February 2018 when it moved into an easing cycle in response to slowing inflation.
     The rate cut was widely expected by analysts after inflation in August fell to a 6-year low of 7.5 percent from 8.7 percent in July, confirming the bank's expectation that inflationary pressures are moderating and consistent with its aim of achieving an inflation target of 9.0 percent, plus/minus 3 percentage points in the fourth quarter of 2020.
     Egypt's inflation rate surged to 33 percent in July 2017 after the Egyptian pound was floated in November 2016 as part of a $12 billion agreement with the International Monetary Fund (IMF) that included a roll back of fuel subsidies and the introduction of a valued-added tax.
     After the 2011 uprising, Egypt's economy took a sharp hit but since mid-2016 the economy has been steadily strengthening and CBE said growth in the second quarter of this year of an estimated 5.7 percent and in fiscal 2018/19 of 5.6 percent was the highest in 11 years.
     Unemployment has also been steadily declining and fell to 7.5 percent in the second quarter, down almost 6 percentage points from its peak in the fourth quarter of 2013.
     Egypt's pound has been steadily rising this year and was trading at 16.31 to the U.S. dollar today, up 9.8 percent since the start of this year, helping contain import prices and thus inflation.
     CBE cut its benchmark overnight deposit rate, the overnight lending rate, the rate on its main operation and its discount rate to 13.25 percent, 14.25 percent, 13.75 percent and 13.75 percent, respectively.

Egypt cuts rate 150 bps as inflation continues to decline

     Egypt's central bank cut its key interest rates by a further 150 basis points and said the "pace and magnitude of future policy adjustments will continue to be subject to confirmation that inflation expectations are anchored at target levels that are consistent with disinflation and price stability over the medium term."
     The Central Bank of Egypt (CBE) cut its overnight deposit rate, the overnight lending rate, the rate on its main operation and the discount rate by 150 basis points each to 14.25 percent 15.25 percent, 14.75 percent and 14.75 percent, respectively.
     CBE has now cut its key rates by a total of 250 basis points this year following a cut in February and by a total of 450 basis points since February 2018 when it shifted into an easing cycle in response to slowing inflation following a surge after the exchange rate of the pound was floated in November 2016 as part of an agreement with the International Monetary Fund (IMF).
      "As incoming data continued to confirm the moderation of underlying inflationary pressures, the MPC (monetary policy committee) decided to cut the policy rates by 150 basis points," CBE said, adding this was consistent with its aim of lowering inflation to its target of 9.0 percent, plus/minus 3 percentage points by the fourth quarter of 2020.
      Egypt's inflation rate fell to 8.7 percent in July from 9.4 percent in June and 14.1 percent in May but the central bank cautioned the path for future policy rates is based on inflation expectations rather than current inflation rates and future rate changes are based on confirmation that inflation expectations are anchored to its target level.
     The larger-than-expected drop in July inflation to the lowest rate in almost four years surprised analysts who had expected inflation to rise following a cut to subsidies that pushed up fuel prices. But it also ignited expectations the central bank would cut its rates by at least 100 basis points today.
      CBE said the fall in inflation was supported by a containment of inflationary pressures and by favorable base effects as the recent fiscal consolidation measures were weaker than in the previous year.
      Egypt's economy is estimated to have expanded by 5.7 percent in the second quarter of this year, up from 5.6 percent in the first quarter, and by 5.6 percent in fiscal 2018/19, the highest rate in 11 years while unemployment is continuing to declined.

Egypt cuts rate 100 bps after hitting first inflation target

     Egypt's central bank cut its key interest rates by a 100 basis points, its first cut in 11 months, saying its first inflation target for the end of 2018 had been achieved and fresh data continue "to confirm the moderation of underlying inflationary pressure."
     This is the Central Bank of Egypt's (CBE) third rate cut since February 2018 and the overnight deposit rate has now been lowered by 300 basis points since then as inflation has fallen.
     The rate cut brings CBE's overnight deposit rate to 15.75 percent, the overnight lending rate to 16.75 percent, the rate on its main operation and discount rate to 16.25 percent.
      CBE said its rates remain consistent with tight real monetary conditions and achieving its inflation target for the fourth quarter of 2020 and price stability in the medium term.
      While some analysts had expected the CBE to cut its rate due to the recent decline in inflation, other analysts expected the central bank to remain on hold for longer, citing a recent tick up in core inflation and the continued adjustment of prices to the government's ongoing cut to subsidies and tax increases in connection with the International Monetary Fund's US$12 billion aid package.
      The CBE noted headline and core inflation rose in January but this was due to an unfavorable comparison.
      In January Egypt's headline inflation rose to 12.7 percent from 12.0 percent in December while core inflation, which excludes some volatile food items, rose to 8.6 percent from 8.3 percent.
      The rate cut follows CBE's decision in December to lower its inflation target to an average of 9.0 percent, plus/minus 3 percentage points, for the fourth quarter of 2020 from its previous target of 13 percent, plus/minus 3 percentage points, for the fourth quarter of 2018.
      While inflation has been declining, Egypt's economy has been improving since the November 2016 agreement with the IMF and gross domestic product growth rose to 5.5 percent in the fourth quarter of last year from 5.3 percent while unemployment fell to 8.9 percent, the lowest since December 2010.
     As part of its reforms agreed with the IMF, the government is targeting a primary surplus of 2.0 percent of GDP in fiscal 2018/19, up from a preliminary 0.1 percent last year, a move the IMF on Feb. 5 said appeared to be on track and this would achieve a cumulative fiscal adjustment of 5.5 percent of GDP in 3 years.
     Earlier this month the CBE received a US$2 billion fifth tranche of its IMF loan.
     In its statement, the IMF said Egypt's economic outlook remains favorable and the recent rise in inflation reflected temporary increases in food and energy but "a restrictive monetary policy stance has helped reverse the increase and keep core inflation well anchored."
     For the current fiscal year, which ends July 1, the IMF forecast inflation will average 15.8 percent and then ease to 12.8 percent in 2019/20 from 20.9 percent in 2017/18.
     Egypt's GDP is seen growing 5.5 percent in 2018/19, up from 5.3 percent in 2017/18, and 5.9 percent in 2019/20.
     After a plunge in November 2016, the Egyptian pound has been trending firmer and rose in late January and has continued to rise this month.
      Today the pound was trading at 17.54 to the U.S. dollar,  2.1 percent higher than at the start of this year.
     As part of the government's reforms, the CBE in November 2016 floated the pound, which quickly lost more than half its value, boosting import prices and inflation.
     The impact of higher fuel, electricity and tobacco prices from the subsidy cuts and higher import prices boosted Egypt's inflation rate to almost 33 percent in July 2017 while the central bank then raised its rates by a further 200 basis points to 18.75 percent the same month.
     By February 2018, the CBE became confident inflation had peaked and was falling so it was able to cut its rate twice in succession by a total of 200 basis points. But since April the rate was on hold.

Egypt holds rate, lowers inflation target to 9% by Q4 2020

      Egypt's central bank left its key interest rates unchanged, as expected, and lowered its inflation target to an average of 9.0 percent, plus/minus 3 percentage points, during the fourth quarter of 2020, from the target of 13 percent for the fourth quarter of this year, which was set in May 2017.
      The Central Bank of Egypt (CBE), which has maintained its rates since March, added that exogenous factors outside the scope of monetary policy may lead to temporary deviations from the new inflation target that was set as inflation continues to gradually decline.
       The CBE kept its overnight deposit rate, the overnight lending rate and the rate on the main operation at 16.75 percent, 17.75 percent and 17.25 percent, respectively. 
      Egypt's headline inflation rate eased to 15.7 percent in November from 17.7 percent in October due to a favorable comparison and the partial reversal of a rise in some vegetable prices.
      Core inflation fell to 7.9 percent in November from 8.9 percent in October, the lowest rate since February 2016.
     "Current policy rates and the inflation outlook remain in line with achieving the targeted disinflation path," CBE said, adding it will not hesitate to adjust its policy stance to achieve its mandate of price stability.
       Inflation in Egypt soared early last year and hit almost 33 percent in July 2017 in response to a rise in regulated prices, such as electricity, tobacco and other fees, as the government slashed subsidies to energy and raised taxes in connection with a US$12 billion International Monetary Fund (IMF) aid package.
       In addition, the CBE in November 2016 floated the pound, which quickly lost more than half of its value, boosting import prices and inflation.
      Analysts are not expecting the CBE to begin cutting its rate until inflation calms down after further government subsidy cuts next year.
      Egypt's economy has been growing steadily for the last 6 quarters with annual growth of 5.4 percent in both the second and first quarters.
       In the third quarter of this year, CBE said the unemployment rate had stabilized at 10.0 percent and while private domestic demand and net exports declined, public demand rose.
       The CBE also said Egypt's finance ministry was targeting a primary surplus of 2.0 percent of gross domestic product in the 2018/19 fiscal year, which began July 1, up from a preliminary 0.1 percent in the previous year, and to maintain this surplus thereafter.
      Since May Egypt's pound has been relatively steady and was trading at 17.89 to the U.S. dollar today, down 0.3 percent this year.

Egypt holds rate as inflation nears fourth quarter target

     Egypt's central bank left its key policy rates unchanged for the third time, saying the current rates are consistent with the outlook for inflation and achieving the target of 13 percent, plus/minus 3 percentage points, in the fourth quarter of this year.
     The Central Bank of Egypt (CBE) has kept its key rates steady since the last cut in March while inflation continues to decelerate and has been below the upper limit of the target range since February.

      Egypt's inflation rate has come down sharply since a record high of almost 33 percent in July 2017 though the headline rate rose slightly in June and July due to higher regulated prices, such as electricity, tobacco and government fees, and some volatile food items.

      In July consumer price inflation eased to 13.5 percent from 14.4 percent in June.
      Core inflation, however, has continued to fall for 12 months in a row and fell further to 8.54 percent in July, the lowest rate since March 2016.
       Inflation surged last year after the government slashed subsidies to energy and raised taxes in connection with a US$12 billion International Monetary Fund (IMF) aid package. 
       In November 2016 the central bank also floated the pound, which quickly lost more than half its value, boosting import prices and thus inflation.
       In response the CBE raised its rates sharply but this year it has cut the rate by a total of 200 basis points following cuts in February and March.

       The CBE kept its overnight deposit rate, the overnight lending rate and the rate on the main operation at 16.75 percent, 17.75 percent and 17.25 percent, respectively.

       In May last year the CBE set a target for inflation of 13 percent, plus/minus 3 percentage points, for the fourth quarter of 2018 and then single digits thereafter after the temporary effect of fiscal supply shocks dissipates.
       The CBE said Egypt's economy had stabilized in the second quarter of this year at the growth rate that was seen in the first quarter, driven by foreign demand and domestic investments.
       Egypt's Gross Domestic Product expanded by an annual 5.4 percent in the first quarter of this year, up from 5.3 percent in the fourth quarter of last year, for the seventh consecutive quarter of accelerating growth.
       In July the IMF said Egypt's economic situation had continued to improve and the near-term growth outlook is favorable, supported by a recovery in tourism and natural gas production.
       The IMF forecast economic growth in the 2017/18 financial year, which ended July 1, of 5.2 percent, rising to 5.5 percent in 2018/19.
        Average inflation was forecast to decline to 14.4 percent in 2018/19 from an estimated 20.8 percent last financial year.

Egypt leaves rate steady, inflation seen in line with target

     Egypt's central bank left its key policy rates steady for the second month in a row, saying inflation is expected to remain in line with its target for the fourth quarter of this year before declining to single digits after the temporary effect of supply shocks dissipate.
      The Central Bank of Egypt (CBE) kept its overnight deposit rate, the overnight lending rate and the rate of the main operation at 16.75 percent, 17.75 percent and 17.25 percent, respectively.
      This year the CBE has cut the rate by a total of 200 basis points.
       In May last year the CBE set a target for inflation of 13 percent, plus/minus 3 percentage points, for the fourth quarter of 2018 and then single digits thereafter.
       Egypt's urban inflation rate decelerated for the 10th consecutive month in May to 11.4 percent from a high of 32.95 percent in July 2017 while unemployment also continued to decline to 10.6 percent in the first quarter of this year, the lowest rate since the fourth quarter of 2010.
       Inflation surged last year after the government slashed subsidies to energy and raised taxes in connection with a US$12 billion International Monetary Fund (IMF) aid package. In November 2016 the central bank also floated the pound, which quickly lost more than half its value, boosting import prices and thus inflation.
       In January the IMF forecast that inflation would fall to 12 percent by June but also warned against premature rate cuts by the central bank.
       Economic reforms have helped boost foreign and domestic investment and the economy has been growing steadily since the fourth quarter of 2016 and grew by an annual rate of 5.4 percent in the first quarter of this year, up from 5.3 percent in the previous quarter.
       The country's potential output is also estimated to have benefitted from the structural reforms, thus easing inflationary pressures from the pickup in demand, CBE said.
       Egypt's pound has depreciated slightly this year and was trading at 17.89 to the U.S. dollar today,  down 0.4 percent this year.

Egypt cuts rate 100 bps as inflation falls, economy grows

      Egypt's central bank lowered its key policy rates by another 100 basis points, as expected, noting inflation was continuing to decline while economic growth last year was the fastest since 2010.
      The Central Bank of Egypt (CBE) has now cut its key rates by 200 basis points this year following a similar cut in February, the first rate cut since January 2015.
      "In its last meeting on February 15, 2018 the MPC (monetary policy committee) began to ease its tight stance on interest rates that successfully managed to tame monthly inflation," CBE said, adding:
       "Cutting key policy rates today remains consistent with tight real monetary conditions and with achieving the inflation target of 13 percent (+_3 percent) in 2018 and single digits thereafter."
      The central bank today lowered its benchmark overnight deposit rate to 16.75 percent, the overnight lending rate to 17.75 percent, and the rate on its main operations and discount facility to 17.25 percent.
       The main risk surrounding CBE's outlook for inflation includes inflationary expectations, the timing and magnitude of reforms to subsidies, demand-side pressures, crude oil developments and the pace of tightening financial conditions.
       Egypt's headline inflation rate declined to 14.4 percent in February after peaking at 33 percent in July while the core inflation rate fell to 11.9 percent from a peak of 35.3 percent.
        It was the lowest headline inflation rate since October 2016 and the lowest core inflation rate since April 2016, CBE added.
       In November 2016 the CBE floated the pound, which quickly lost over half its value. Since then the pound has been slowly appreciating and was trading at 17.62 to the U.S. dollar today, up 1.1 percent this year but still down just under 50 percent since before the float.
        Meanwhile, Egypt's economy grew by an annual rate of 5.3 percent in the fourth quarter of 2017, the sixth consecutive quarter of annual growth, for 2017 growth of 5.0 percent.
        At the same time, unemployment is declining and fell to 11.3 percent in December, the lowest since December 2010.
       "The pickup of economic growth was largely boosted by higher net external demand, due to more competitive exchange rates, followed by public domestic demand, which have more than offset lower private domestic demand," CBE said.

Egypt cuts rate 100 bps as inflation 'pressures contained'

      Egypt's central bank cut its key policy rates by 100 basis points, its first cut since January 2015, saying data confirms a moderation of underlying inflationary pressures and confidently declaring that "inflationary pressures have been contained."
      The rate cut was widely expected after inflation fell to 17.1 percent in January, the lowest since October 2016, continuing the steady fall from almost 33 percent in July when prices soared after the government raised fuel and electricity prices as part of an IMF-backed reform to deregulate the economy and rein-in government spending.
       Last week Tarek Amer, governor of the Central Bank of Egypt (CBE), fueled rate cut speculation by saying the central bank planned to start easing monetary policy "soon" once it's sure inflation is under control.
       Prior to today's rate cut, the CBE had maintained its rates since July 2017 when it completed a 1,000 basis point tightening cycle that began in December 2015.
       Since November 2016, when the CBE liberalized its foreign exchange market and allowed the pound to float, rates were raised by 700 basis points.
       Today's 1.0 percentage point rate cut brings down the overnight deposit rate, the overnight lending rate and the rate on its main operation to 17.75 percent, 18.75 percent, 18.25 percent respectively. The discount rate was also cut 100 points to 18.25 percent.
       "Inflationary pressures have been contained, a consequence of tighter real monetary conditions," the CBE said, adding that its monetary policy committee "will not hesitate to adjust its stance to achieve its mandate of price stability over the medium term."
      The CBE is targeting inflation of 13 percent, plus/minus 3 percentage points, by the fourth quarter of this year and then single digits thereafter.

      Last month Egypt's finance minister said he expected inflation to fall to 10-12 percent during this year and then below 10 percent in 2019, and the International Monetary Fund also forecast that inflation would fall to 12 percent by June and single digits by 2019.

       Egypt's economy suffered a severe blow in the wake of the Arab Spring in 2011 but has been steadily improving, helped by stronger external demand and a more competitive exchange rate along with public demand that has helped offset lower private demand.

       The CBE said Gross Domestic Product grew for the fifth consecutive quarter to 5.3 percent in December for 2017 growth of 5.0 percent, the highest since 2010.

       Egypt's pound has been relatively stable since the central bank floated the currency in November 2016 apart from a brief dip and then rebound about 12 months ago.

       Today the pound was quoted at 17.3 to the U.S. dollar, up 2.9 percent this year as investors slowly return to Egyptian assets. However, the pound is 49 percent lower than the peg of 8.8 to the dollar in the days running up to the float of the currency on Nov. 3, 2016.

Egypt holds rate, materialization of risks guide changes

     Egypt's central bank kept its policy rates unchanged, as expected, and said the economy had developed largely as expected so its rates were consistent with achieving its inflation target of 13 percent, plus/minus 3 percentage points, by the fourth quarter of 2018 and in single digits thereafter.
     But the Central Bank of Egypt (CBE), which has raised its benchmark overnight deposit rate by 1,000 basis points to 18.75 percent since embarking on a tightening cycle in December 2015, added there were several risks surrounding this inflation outlook, most notably inflation expectations, demand-side pressures and the magnitude of any reform to government subsidies and their second-round effects.
     "The materialization of such risks could lead to a stronger than projected loosening or tightening of the committee's stance to ensure that the inflation outlook is consistent with the targeted disinflation path," the CBE's monetary policy committee said.
     Egypt's headline inflation rate accelerated further to 33.0 percent in July from 29.8 percent in June to the highest rate since June 1986 as regulated fuel prices were raised by up to 50 percent, electricity prices by up to 42 percent, and value-added-tax was raised to 14 percent as part of last year's $12 billion agreement with the International Monetary Fund (IMF) aimed at curbing the government budget deficit and reforming the economy.
      Inflation also jumped in the wake of a float of Egypt's pound last November, with the CBE since then raising its policy rates by 700 basis points to contain second-round effects on inflation from government reform measures and the jolt to import prices from the plunge in the pound after the float.
      Despite soaring inflation, Egypt's economy is slowly improving with annual Gross Domestic Product in the second quarter of this year up by 4.9 percent, up from 4.3 percent, 3.8 percent and 3.4 percent in the preceding quarters, the CBE estimated.
      Based on data up to March, the central bank said the structure of economic growth has shifted to net exports and investments rather than consumption, with tourism, natural gas, trade, construction and non-petroleum manufacturing driving economic growth.
      The far-ranging reform of Egypt's economy is being supported by the IMF, which in July released another $1.25 billion as part of the 3-year, $12 billion program.
     "Egypt's reform program is off to a good start," the IMF said on July 13, adding the transition to a flexible exchange rate regime had gone smoothly and the parallel currency market had virtually disappeared and bank reserves had increased significantly.
      The IMF also lauded the CBE's move to reduce inflation by raising its policy rates, absorbing excess liquidity and developing a clearly defined policy anchor to manage inflation expectations.
       The government's efforts to curb its deficit by raising VAT and reforming energy subsidies is forecast to result in a primary surplus in 2017/18 for the first time in a decade, the IMF said, adding significant progress has also been made on structural reforms.
       The IMF forecasts that Egypt's economy will grow 3.5 percent in the 2016/17 financial year, which ended June 30, and then by 4.5 percent in the current 2017/18 financial year.
       Headline inflation is seen averaging 22.1 percent this fiscal year, falling to 10.3 percent by June 2018.

This week in monetary policy: Armenia, Thailand, Namibia, Egypt and Chile

    This week (August 13 through August 19) central banks from 5 countries or jurisdictions are scheduled to decide on monetary policy: Armenia, Thailand, Namibia, Egypt and Chile.

    Following table includes the name of the country, the date of the next policy decision, the current policy rate, the result of the last policy decision, the change in the policy rate year to date, the rate one year ago, and the country’s MSCI classification.

    The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.

WEEK 33
AUG 13 - AUG 19, 2017:
COUNTRY	DATE	RATE	LATEST	YTD	1 YR AGO	MSCI
ARMENIA	15-Aug	6.00%	0	-25	7.25%
THAILAND	16-Aug	1.50%	0	0	1.50%	EM
NAMIBIA	16-Aug	7.00%	0	0	7.00%
EGYPT	17-Aug	18.75%	200	400	11.75%	EM
CHILE	17-Aug	2.50%	0	-100	3.50%	EM

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