Monday 13 January 2020
I wrote – Manal Al-Masry:
4 out of 5 bankers suggested that the central bank reduce interest rates between 0.5 and 2% during the bank’s monetary policy committee meeting next Thursday.
And the central bank will hold next Thursday the first meeting of the monetary policy committee in 2020, with its new formation, which was approved by the bank’s board of directors a few days ago in its first meeting, after a republican decision to set it up under the chairmanship of the bank’s governor, Tareq Amer.
These expectations come after the Central Bank reduced interest by a total of 4.5% 4 times during the current year, and the total reduction during the last two years reached 6.5%, so that interest rates approached that of their level before floating, reaching 12.25% for deposit, and 13.25% To lend.
The bankers who suggested reducing interest on Thursday attributed their expectations to many factors, most notably in line with the state’s trends in supporting productive projects and increasing investment rates, and declining levels of general monthly inflation. Increase the employment of lending rates.
The data of the Central Agency for Public Mobilization and Statistics showed last Thursday that the monthly inflation rate for the total of the republic in December recorded a negative rate of 0.2% compared to a negative rate of 0.5% during the month of November, according to what the data showed.
These bankers said that the rise in annual and basic annual inflation was expected due to the impact of the base year, and therefore would not affect the central bank’s decision to cut interest, as the central bank does not base its decisions on current inflation rates only, but the vision also includes future expectations.
According to Statistics Authority data, the annual inflation rate rose to its highest level in the last 5 months, during last December, to record the Republic’s total 6.8%, compared to 2.7% last November.
And the annual rate of inflation in cities reached 7.1% in December, compared to 3.6% last November.
The central bank said, in a statement last Thursday, that the annual rate of core inflation rose to 2.4% last December compared to 2.1% last November, as the monthly rate of core inflation recorded 0.2% in December, compared to a negative rate of 0.1% last November.
Mohamed Abdel-Al, a member of the board of directors of a private bank, expected that the Central Bank’s monetary policy committee would cut interest rates between 0.5 and 1% at its meeting next Thursday.
Tamer Al-Sadiq, deputy director of international transactions at Meed Bank (formerly Egypt Iran), agreed with Abdel-Al’s expectations to cut interest between 0.5 and 1% during the next meeting.
While the expected rate cut rate was limited to estimates by Ahmed El Khouly, head of the treasury sector in the Housing and Development Bank, at 0.5%, the expectations of Mohamed Badra, a member of the board of directors of a private bank, were largely optimistic about a reduction of between 1.5 and 2% in one go on Thursday.
Mohamed Abdel-Al said that there are a number of factors that push the central bank to cut interest, including working to stimulate production growth rates in line with the state’s plan by facilitating borrowing for expansions by reducing cost, in addition to that the central aims to push banks to increase the rates of investing money .
Abdel-Al added that among these factors is also motivating clients to request financing in the Central Bank’s initiatives to finance the industrial sector and real estate financing for middle-income with a decreasing interest rate of 10%, which were announced last month in the form of financing 100 billion pounds for the first, and 50 billion for the second.
He stated that the central bank also aims at reducing interest to reduce the cost of the debt burden on the state’s general budget by reducing the return on treasury bills and bonds that are offered in order to bridge the budget deficit.
Among the factors that may drive the central bank to reduce interest are the stability of inflation conditions and the decline in the levels of the monthly general rate, which is taken into consideration when making interest decisions, according to Tamer Al-Sadiq.
Al-Sadiq told Masrawy that the high rate of annual or basic annual inflation during December was expected to be affected by the base year and therefore there is no concern about it, as long as the levels of monthly inflation decline.
Mohamed Abdel-Al stated that the central bank places in its accounts before the decision to cut interest rates the expected long-term inflation rates, and not the current inflation rate only, based on accurate data and criteria.
According to Tamer Al-Sadiq, another factor that may push the central bank to cut interest is that the interest rates offered by banks on savings certificates are still higher than the inflation rates, where banks give 12% interest on certificates against an inflation rate that reached after rising to 6.8%.
Al-Sadiq said that the central bank also wants to bring interest rates closer between the initiatives announced before the end of last December, the normal interest rate in banks to motivate customers to borrow, and increase the employment of high liquidity rates in the banking system.
Ahmed El-Khouly told Lamraoui that the central bank is now heading to support the policy of increasing production and raising investment rates, as he decided in the previous period to raise the maximum monthly installment percentage to pay consumer loans to 50% of the customer’s income instead of 35%, which shows his plan to follow Flexible policy for further rate cuts.
Al-Khouli added that the Central Bank’s policy in managing monetary policy over the past years has proven successful in controlling inflation and increasing growth rates.
Mohamed Badra attributed his expectations of the expected big rate cut on Thursday to the goal of the central bank and the country to increase customer motivation to invest in the stock market and productive projects such as industry, which need to reduce interest further, according to Masrawy.
On the other hand, Mohamed Ali, head of the treasury sector in a public bank, violated previous expectations, suggesting that the central will tend to stabilize interest rates next Thursday.
Ali attributed his expectations to the central bank’s desire to monitor inflation trends, and the external repercussions that revolve in the Middle East region on the economy and prices.
The formation of the board of directors of the new central bank includes the presidency of Tariq Amer, the governor of the bank, and the membership of his two deputies, Jamal Najm, and Rami Abu Al-Naja, as well as the membership of Mohamed Omran, head of the Financial Supervision Authority, as a representative of the authority, and Ashraf Al-Arabi, former Minister of Planning, Najla Al-Ahwan and the former Minister of International Cooperation as economic experts.
It also includes the new formation of the Board of Directors in its membership, Ali Faramawi as a banking expert, and Tamer Al-Dakkak as a legal expert, in addition to a representative of the Ministry of Finance.