Economist expect interest rates to drop by 500 bps in 2018: Economist interviewed by Al Mal see the central bank adopting a very cautious and tight monetary policy this year, with most seeing interest rates falling by up to 500 bps in 2018. The consensus appears to be that while inflation has been declining, the CBE would need to weigh that against a possible spike in inflation once the government further cuts subsidies in FY2018-19, which begins in July. Pharos Holding’s Head of Research Radwa El Swaify expects interest rate cuts to come gradually, seeing them to drop 200-500 bps this year. She sees the bulk of the interest rate cuts to come in mid-2018, once the CBE gets a better picture on inflation levels following the subsidy cuts. She added that adopting wide interest rate cuts early on in the year could send the wrong signal to the market that the CBE is turning completely towards growth. CI Capital’s Hany Farahat expects the first of the interest rate cuts to come during 1Q2018, and will drop 5% for the whole year.

When could it start? The CBE Monetary Policy Committee will hold its next meeting on 15 February.