Analysts expect CBE to hold Thursday but consensus cracks
· Egyptian market news · EAST
A majority of analysts expect the Central Bank of Egypt (CBE) to keep interest rates on hold at 19% when its Monetary Policy Committee (MPC) meets on Thursday began in April
Timeline: in February April May July August
The case for holding
August urban inflation unexpectedly slowed to 14.5% 12% household electricity hike
Morgan Stanley forecasts the disinflation trend continues: recent note (pdf)
The CBE’s own baseline is less optimistic:
The IMF’s own projections are slightly more cautious: in July
The US Federal Reserve raised rates by 25 bps to 3.75-4.00% last Wednesday
The impact on Egypt’s carry trade looks contained.
What breaks the consensus
The benign inflation headline masks pressures building underneath, and the CBE needs to act
Her case rests on what’s coming, not what’s already priced. closed its East-West pipeline European Central Bank
The carry trade remains attractive 364-day T-bills
The CBE’s other tools
The CBE is not limited to moving the corridor rate. pulled EGP 500 bn out of the banking system
The USD is expected to trade within a 49-52 per EGP range through year-end Suez Canal volumes 80% hotel occupancy in the Red Sea Banque du Caire and Misr Life Ins
The wildcard is inventory.
OUR TAKE- Thursday’s meeting