01:16 PM
Sunday 16 January 2022
I wrote – Manal Al-Masry:
Bankers expected the central bank to fix the interest rate for the tenth time in a row, during the first meeting of the Monetary Policy Committee this year during the month of February.
The Monetary Policy Committee of the Central Bank decided to fix the interest rate 9 consecutive times over the course of 8 meetings last year and once in 2020, which is the longest period in which the interest rate was kept following the liberalization of the exchange rate.
Mohamed Abdel-Al, a member of the board of directors of a private bank, expected the Central Bank to prove interest on deposits and lending at the first meeting of the Monetary Policy Committee at the beginning of next month.
He attributed his expectations of the Central Bank fixing interest to the consistency of current interest rates with the targeted inflation rates and the Central Bank’s policy to support and stimulate the pace of production and increase the growth rates of the economy, which requires not to move interest.
The inflation rate is still at the bank’s targets at 7% (plus or minus 2%) by the end of next December, according to what it announced last year.
The annual inflation of the country’s total rose in December to 6.5%, compared to 6.2% last November, following declining for two consecutive months, according to data from the Central Agency for Public Mobilization and Statistics.
According to Abdel Aal, any interest rate cut is currently unacceptable, and raising it is not desirable to make the best option among the three, which is the stabilization decision in order to maintain the stability of commodity prices that are affected by the interest movement and thus are reflected in the increase in inflation, which contradicts the objectives of the Central Bank.
He added that the Central Bank’s decisions regarding renewing the stimulus packages for the economy once more requires the need to stabilize interest in light of the existence of initiatives with subsidized interest rates of 8%, 5% and 3% annually on a decreasing basis.
Last month, the Central Bank issued a package of decisions that included extending the work to stop collecting fees and commissions on cash withdrawals from ATMs, as well as continuing to cancel subscription fees for digital services until the middle of this year due to the ongoing pandemic.
The Central Bank also decided in the same month to extend the work of the initiative to support tourism to postpone and restructure the debts of companies to banks, and retail loans to workers in the sector until the end of this year.
Abdel-Aal clarified that raising interest rates in the next meeting with the continuation of the initiatives with subsidized interest increases the cost burdens on the Central Bank, and therefore the stabilization scenario is likely by 90%.
Tamer Al-Sadiq, deputy head of the international transactions sector at Med Bank, said that the central bank will move to fix the interest rate for the tenth time in a row, as it is not directed by any economic pressures that push it to increase interest rates, especially with the Federal Reserve not moving interest so far.
He explained that despite the high rates of inflation, it is still at the Central Bank’s targets, which helps it to stabilize interest rates to maintain price stability in the market.
Al-Sadiq added that Turkey’s decision to reduce the interest on the lira came in the interest of Egypt, and reduced any pressure on the continuation and preservation of indirect foreign investments, but rather contributed to the entry of a new share to benefit from the attractive interest rates.
According to Al-Sadiq, the continuation of the Central Bank’s initiatives with subsidized interest helps it to maintain the current interest rates unchanged.
Two years ago, the Central Bank allocated an initiative of 8% annually, decreasing to support the industrial sector, agriculture, contracting, and medium-sized projects, allocating a tranche of 100 billion pounds before its multiples of 200 billion pounds, and it is effective so far.
The Central Bank also continued the initiative to support tourism with an annual interest rate of 8% on a decreasing basis, allocating a financing segment of 50 billion pounds to it, in addition to an initiative with a 5% decreasing interest rate to support small projects, allocating a total segment of 317 billion pounds to it.
An initiative was put forward following the middle of last year to support ordinary individuals with a decreasing annual interest of 3% for real estate financing for the limited and middle-income segment, allocating a segment of the value of 100 billion pounds, and another with a subsidized interest of 3% per annum fixed to replace cars to work with dual fuel (gas and gasoline) allocated to it a segment worth 15 billion fairy.
Mahmoud Najla, Executive Director of Money Markets and Fixed Income at Al-Ahly Financial Investments Company, agreed with previous opinions in the direction of the Central Bank to stabilize interest in the next meeting to stabilize economic conditions and indicators.
He stressed the absence of fundamental changes that would push the CBE to raise interest rates in the next meeting, especially the US Federal Reserve (the Central Bank) that did not take a step to increase interest, as it is difficult to compare the state of Egypt’s economy to some European countries that raised interest rates.
He explained that maintaining inflation rates at the Central Bank’s targets, especially the basic ones prepared by the Central Bank, with the continuation of indirect foreign investments in the Egyptian pound, helps the Central Bank to maintain interest.
The Central Bank of Egypt had announced a rise in the annual core inflation rate to 6% last December, compared to 5.8% in November.
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