CBE keeps rates unchanged in its last meeting of 2017: The central bank’s Monetary Policy Committee (MPC) kept the overnight deposit rate at 18.75%, the overnight lending rate at 19.75%, and the rate of its main operation and discount rate unchanged at 19.25% in its meeting last Thursday. Keeping the rates unchanged came in line with expectations. The MPC says that while the drop in inflation accelerated in November due to favorable base effects, “inflation was affected during this period by continuous supply shocks related to fiscal consolidation measures, leading regulated price adjustments to account on average for 44% of monthly headline inflation, in addition to indirect effects on core CPI items.”

Leading indicators also point to continued improvement in economic activity, despite weaker momentum in non-hydrocarbon sectors. The MPC added that it decided that current policy rates remain appropriate and its baseline inflation outlook remains consistent with its targets. The MPC also provided forward guidance saying it will “only reconsider its stance conditional upon data confirming the moderation of underlying inflationary pressures.”

“The timing of interest rate cuts will be determined by: managing consumer expectations to be able to reach CBE inflation targets by 2018 year-end, oil prices and their impact on inflation through subsidy cuts, domestic demand growth as a result of the witnessed pick-up in economic activity, and monetary policy in advanced economies,” Pharos’ head of research Radwa El Swaify told Reuters.

CI Capital Asset Management’s Khaled Darwish sees the CBE cutting rates in 2018. “that will likely prompt more investors to opt for stocks over bonds. Healthcare, infrastructure and consumer shares have the most attractive valuations” he tells Bloomberg.

… Separately, the central bank also announced on Thursday that it is extending its initiative to support the tourism sector until December 2018. The initiative, which was started in February 2016, allows banks to show more leniency in collecting loans from the sector and also be more relaxed in collecting personal loans from people who work in the tourism industry.

The central bank also repaid over USD 2 bn in debt in December, Al Masry Al Youm reports. USD 1.2 bn was repaid to AfreximBank and USD 920 mn to other international bodies. This month, the central bank will be repaying USD 700 mn to the Paris Club debtors.

The paper also reported that the central bank has received the USD 2 bn loan tranche from the IMF on Thursday. The amount represents the third instalment of Egypt’s extended fund facility from the organization.