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Tuesday, 27 March 2018

What we’re tracking on 27 March 2018

An interest rate cut by the central bank’s Monetary Policy Committee on Thursday will not spell the end of the carry trade, EFG Hermes Research believes. The investment bank says foreign purchases of Egyptian treasury bills will see an “effective” decline in the event the CBE reduces interest rates, EFG Hermes Research head Ahmed Shams El Din said in a statement to MENA news agency, but sees foreign appetite staying strong.

Research houses are unanimous in saying that the CBE will cut rates again with its Monetary Policy Committee meets this coming Thursday, predicting drops ranging from 50-200 bps. We would not be surprised to see the CBE go for a 50 bps rate cut, sending the right signal, but holding a steeper cut until after it gauges the inflationary impact of subsidy cuts expected in July. But what do we know — we’re guessing like everyone else. Pharos Research sees a 100 bps rate cut, the firm said in a research note (pdf) that we noted earlier this week, and CI Capital also sees a 100 bps dip in the cards this week as inflation continues to ease. HC Securities is also expecting a similar rate cut. “Although we anticipate energy prices will increase in July, resulting in a one-off inflation hike, we do not see this as a reason to halt monetary easing efforts at the current stage as, according to our numbers, it would not disrupt the CBE’s 4Q18 inflation target,” HC’s Chief Economist Sarah Saada told us in an email yesterday, stressing the importance of of a rate cut to sustainable growth and investment.

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