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Tuesday, 12 November 2019

Egypt’s core inflation rises fractionally in October; CBE sells EUR 695 mn in one-year EUR-denominated treasury bills

Egypt’s annual core inflation rose marginally in October to 2.7% from 2.6% the previous month, the CBE said yesterday (pdf). Annual headline inflation dropped to 2.4% last month, marking its lowest reading in nearly a decade, as we noted yesterday. Headline inflation accounts for a basket of goods and services in an economy while core inflation removes volatile products such as food and fuel. Reuters also had the story.

Last month’s inflation readings are fueling expectations that the Central Bank of Egypt’s Monetary Policy Committee will cut rates when it meets for the penultimate time this year on Thursday, 14 November. Our poll of economists last week had five out of the six calling either a half-point or a 100 bps cut. The CBE cut rates by 250 bps during the past two meetings, bringing the overnight deposit rate down to 13.25% and the lending rate to 14.25%. The main operation and deposit rates currently stand at 13.75%.

Speaking of the central bank: The (CBE) sold EUR 695 mn in one-year EUR-denominated treasury bills at an auction yesterday, official data showed (pdf). The bills were sold at an average yield of 1.434%, marginally lower than the 1.49% yield offered in a similar auction of EUR bills in August. The sale was 1.2x oversubscribed, with the CBE receiving bids amounting to EUR 851.5 mn.

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