The Central Bank of Egypt has announced a cut in interest rates by 1% on one-night deposits and loans. They are now at 10.5% and 12.5% respectively. The Bank has also reduced the credit and discount rate by the same percentage. This rate now stands at 10.5%. This is the first time this decision has been taken this year, as the Bank had previously increased interest rates six times in a row throughout 2008 until they finally stood at 11.5% for deposits and 13.5% for loans last December. Investors and businessmen had repeatedly demanded a reduction of interest rates in response to the changes in the market and in line with the measures adopted by world countries due to the global economic crisis. The Bank said in a statement that the Monetary Policies Committee took this decision during its meeting on Thursday evening following a drop in inflation rates to 14.3% - according to the prices for consumers – in January after they had reached 20.3% and 18.3% in November and December 2008. The Central Bank admits in its statement that the sharp fall in commodity prices worldwide since last August has not been entirely felt on Egyptian markets. It also adds that the decision to cut interest rates aims to keep economic growth stable and that the Monetary Policies Committee will continue to take the necessary measures to contain the negative effects of the global crisis. The director of the Egyptian Bank Federation, Ali Fayz, said the decision was fair and denied the Central Bank and its governor Farouk el-Okda had been pressured by the government to cut interest rates. The chairman of the American Chamber of Commerce Omar Mohanna expected a new cut in interest rates if inflation rates continued to fall by 2% a month. Meanwhile, Bassant Fahmi, consultant at the Egyptian Saudi Finance Bank, said the decision would help defaulting companies pay their debts to banks.
