In a research article, Beltone expected the Central Bank of Egypt (CBE) to continue monetary easing through interest rate reductions by about 300 basis points in 2020. The article also predicts that the CBE will keep interest rates unchanged after the next Monetary Policy Committee (MPC) meeting scheduled for 16 January. This will be in order to test the level of liquidity after bold interest rate cuts made in 2019, in addition to accommodating the effect of cash outflows from investing in fixed income instruments on the normal date for rebalancing financial portfolios by the end of the year.
Beltone indicated that other major factors are foreign flows in fixed income instruments, after the impact of lower interest rates on returns, in addition to the performance of net foreign assets with banks and the CBE, as well as the stability of the Egyptian pound’s exchange rate, expected to be between 16 and 17 pounds against the US dollar.
Beltone stressed that the exchange rate of the Egyptian pound will continue to support good readings of inflation until the end of the year, which keeps inflation rates within 9% (± 3%) until the end of 2020, despite the fact that auxiliary factors have started to calm since the comparison period.
The article mentions that inflationary pressures will be contained, as domestic fuel prices did not change in the second quarterly review, which would support a low reading of inflation on a monthly basis.