Egyptian central bank cuts interest rates for second time..

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Egyptian central bank cuts interest rates for second time..

Post by DJKeefy » Fri Sep 20, 2013 8:22 pm

Egyptian central bank cuts interest rates for second time in a row.

The monetary policy committee of the Central Bank of Egypt slashed the deposit rate and the lending rate by 50 basis points to reach 8.75 percent and 9.75 percent respectively on Thursday, the bank’s website showed.

The committee has also lowered its discount rate and the rate it uses to price one-week repurchase and deposit operations to 9.25 percent.

The cut in the rate of the borrowing cost for the second time in row comes on the back of the softening inflation. In August, the central bank lowered its main overnight interest rate by 50 basis points for the first time since 2009.

Egypt’s annual urban headline inflation fell to 9.7 percent in the twelve months to August 2013, down from 10.3 percent a month earlier, figures from the Central Agency for Statistics and Mobilisation (CAPMAS) showed earlier in September.

The one-percent-decline of food and beverage prices over the last month has attributed to slowing the Egypt’s consumer price index.

“Egypt’s GDP growth remains to be partly suppressed by continuing weaknesses, albeit of lesser extent, in the manufacturing sector,” the monetary policy committee stated. “In the meantime, investment levels remained low given the heightened uncertainty that faced market participants since early 2011 and the weak credit growth to the private sector.”

It added that factors mentioned above pose downside risks to domestic GDP, which will limit upside risks to the inflation outlook going forward and that has driven the cut in key central bank rates.

Cairo-based investment bank Beltone Financial expected on Thursday that the central bank would lower interest rates to help the government achieve its primary goals of boosting domestic economic growth in addition to maintaining price stability.

“We do not expect any imminent upward pressure on the inflation outlook in September and October 2013. International food prices will continue to ease in the next couple of months following August’s trend,” Beltone deemed.

The Egyptian pound is at an official average of 6.90 to the dollar, according to the CBE website. The US dollar has dropped by 1.4 percent, after averaging LE7 in mid-June.

Source: http://english.ahram.org.eg/News/82085.aspx


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Re: Egyptian central bank cuts interest rates for second tim

Post by LovelyLadyLux » Sat Sep 21, 2013 3:33 am

Interesting the workings of banks

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Re: Egyptian central bank cuts interest rates for second tim

Post by Hafiz » Sun Sep 22, 2013 4:57 am

If you have 9.7% inflation then the cost of borrowing is small but even at these low real rates the economy is stalled and few businesses would be looking to make investment at any rate at this time. Even if rates were lower the practices of the trading banks mean that small and middle sized firms have difficulty getting commercial loans and housing mortgages are difficult and verging on impossible for many, other than the rich, Egyptians.

Wholesale reform of banking was part of Morsi's Renaissance program. To his discredit he did little or nothing to implement this but at least he had a policy on this important problem whilst the status quo, who are back in power, have no policy for reform in this area important to economic growth.

The ominously named Central Agency for Statistics and Mobilization is what it sounds like. A government organ not an independent statistical body. Truth has never been a strong suit in Egyptian politics in the past 61 years and the Central Agency is probably as unused to truth as the rest of their rackety bureaucrat sisters.

The article seems to say that the bank rate has been reduced by 1% in the last month. Seems drastic. Maybe the Central Bank is trying to head off problems down the track.

The al Ahram article says that food prices have declined by 1% in absolute terms (over an unspecified period). Is this credible?

The lower central bank rate will tend to reduce the pound and this will likely increase prices for food and fuel and lead to further inflation.

Don't seem to be any good economic stories and if I was the army I'd get out quick and hand the economic time bomb over to some quislings.

Al Ahram may have got their arithmetic wrong on food. Not for the first time have they made arithmetic mistakes in favor of certain groups. Maybe the 1% absolute drop they herald is a reduction in the rate of increase.

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