Egypt’s central bank seen making fourth consecutive interest rate cut

The headquarters of Egypt's Central Bank are seen in downtown Cairo, Egypt January 11, 2018. (Reuters)
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Updated 14 January 2020

Egypt’s central bank seen making fourth consecutive interest rate cut

  • Analysts say inflation still low enough for further cuts
  • Central bank cut rates by combined 450 bps in 2019

CAIRO: Egypt’s central bank is likely to cut interest rates for a fourth consecutive time on Thursday, a Reuters poll showed, despite inflation rising in December.
Eight out of 11 economists surveyed by Reuters expected the Central Bank of Egypt (CBE) to cut rates. Four saw a 50 basis point cut and four predicted a 100 bps cut.
“With December inflation confirming inflation will normalize at 6-7%, we think the CBE has ample room to continue reducing interest rates,” said Mohamed Abu Basha of EFG Hermes, who predicted a 50 bps cut.
Egypt’s annual urban consumer price inflation rose to 7.1% year-on-year in December from 3.6% in November, though this had been expected as favorable base-year effects wore off.
Inflation had fallen as far as 3.1% in October, its lowest since December 2005. Month-on-month urban headline inflation stood at -0.2% in December from November, falling for a second consecutive month.
The CBE cut rates by a combined 350 basis points at its last three consecutive meetings, and 100 bps in February 2019. The overnight rates are at 12.25% for deposit and 13.25% for lending.
The bank’s monetary policy committee had been due to meet on Dec. 26 but the meeting was postponed to Jan. 16 pending the confirmation of committee members under governor Tarek Amer’s second four-year term.
“I expect to see the MPC of the Central Bank of Egypt continue the trend, seen over the last year, of cutting rates by 100 bps,” said Angus Blair of business and economic forecasting think-tank Signet.
“The main beneficiary of the cut in rates is the government, which will see greater and much-needed fiscal manoeuvrability, as well as a few stock market listed indebted companies.”
Radwa El-Swaify of Pharos Securities Brokerage was one of three economists to forecast that the CBE would hold rates steady.
“We expect the CBE to hold rates constant on Jan. 16, in light of the uptick in inflation, in order to assess the impact of the previous rate cuts, and in light of geopolitical unrest in the region,” she said.
Swaify added that the CBE would “start resuming a less aggressive easing cycle in 2020 whereby we expect a 200-300bps cut in rates over the course of the calendar year.”

Dubai rents may be bottoming out as ‘green shoots’ appear

Updated 20 January 2020

Dubai rents may be bottoming out as ‘green shoots’ appear

  • An estimated 45,000 homes were completed in Dubai in 2019 according to Chesterton estimates

LONDON: Confidence may be returning to Dubai property despite a bloated market for off-plan homes, according to a report from Chestertons, the real estate broker.

Although apartment and villa sales prices were down 2 percent and 3 percent respectively in the fourth quarter of 2019 compared to the previous quarter, rental rates are stabilizing.

But supply issues continue to represent the biggest challenge facing the market, with 45,000 new units completed in 2019 and that expected to double this year.

“The Dubai residential market in Q4 2019 is alluding to a more positive outlook for 2020 thanks to the slowdown of sales price declines and the leveling of rental rates,” said Chris Hobden, of Chestertons MENA. “This does, however, have to be tempered by the volume of new units scheduled for delivery in 2020, which makes the short-term recovery of prices in the emirate unlikely.”

In the rental market, no movement was witnessed in the fourth quarter with the market supported by a draft law which would fix rental rates for three years upon the signing of a contract. 

“To ensure high occupancy in 2020, landlords will have to be realistic in the face of tough market conditions. The incentives previously offered to tenants, such as rent-free periods, multiple cheques and short-term leases, will continue, with an increase in tenant demand for monthly direct debit payments also likely” added Hobden.