Egypt: CBE cuts rates 150bps – Standard Chartered

Bilal Khan, senior economist at Standard Chartered, notes that the Central Bank of Egypt (CBE) lowered its policy rate (the overnight deposit rate) by 150bps to 14.25% on 22 August, in line with Standard Chartered’s expectations.

Key Quotes

“The Bloomberg consensus forecast was for a 100bps cut. We think the (dis)inflation outlook supports further easing; global market sentiment is the key source of uncertainty on Egypt’s monetary policy path.”

“The CBE said future decisions will be guided by “inflation expectations” rather than past CPI prints. We forecast that inflation will remain well anchored in the coming months, well within the CBE’s target of 9% +/- 3ppt for end-2020. We maintain our call for another 400bps of cuts for the rest of FY20 (year ending June 2020).”

“The main risk to our call is global financial-market sentiment towards EM and the impact of further CBE easing on offshore holdings of Egyptian debt.”