Egypt cuts rate 3rd time in 2019 as inflation eases

    Egypt’s central bank lowered its key interest rates for the third 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.