Sunday 09 February 2020
I wrote – Yasmine Selim:
Shuaa Investment Bank expects the central bank to reduce the interest rate cumulatively by 2% this year.
According to the bank’s annual strategic report on expectations for the new year, the central bank will cut interest 1% in the first half of next year, returning the interest rate to its normal levels of 10.25% for lending by June 2021.
The report expected that the price of one-night lending at the end of next June would be 12.25% for lending, and at this price the central bank would have cut the interest rate by 1% during the current fiscal year.
The central bank had cumulatively cut interest rates 4.5% over the past year.
In the wake of the pound floating in November 2016, the central bank raised the interest rate by a total value of 7% before it started the rate-cutting cycle beginning in February 2018.
The interest rate is now 13.25% for lending and 12.25% for deposit.
According to the Shuaa report, companies operating in Egypt will resume their capital spending on their business during the second half of this year to take advantage of the appropriate interest rate environment.
The report expects that consumption will recover at the private sector level during the current year, as a result of lower interest rates and stable inflation rates.
He said that after the pound depreciated following the float in 2016, prices rose to unprecedented levels and this was exacerbated by the reduction in subsidies, especially in fuel.
According to the report, with the end of the economic reform program in Egypt, consumers will reset their consumption patterns to nearly the normal rate.
The report predicts that “pent up” demand for cars will begin to recover this year.
Last November, Egypt completed an economic reform program that began in November 2016, by floating the pound, raising the interest rate and raising interest.