Arqaam, Exotix see further interest rate cuts in 2019: Analysts are not making the rounds unpacking the central bank’s surprise 100 bps cut to interest rates last week, which defied the predictions of most analysts who believed the bank would hold off on further easing.

Arqaam sees another 300-400 bps in cuts through year’s end, saying in a tote that all of the subsequent cuts will come in the second half of the year after the short-term inflationary effects of the fuel price adjustment and energy subsidy removal have receded. Inflation will quickly fall back in August, reaching single digits during 2H2019.

Exotix Partners says to keep an eye on the exchange rate in the second half of the year, with head of equities research and strategy Hasnain Malik telling Bloomberg TV (watch, runtime: 2:01) that such a large cut this early in the year underscores a “sense of confident” after the central bank phased out its parallel repatriation mechanism for foreign investors. But the rate cut also points to concerns about economic growth, he added, saying that capex borrowing to fund domestic investment has lagged because rates are too high. With the EGP about 20% over-valued in real effective exchange rate terms, keep an eye pressure on the currency in the second half: The trick is how to bring rates down while keeping the FX rate broadly stable, he suggests.