Beltone Financial, the Egyptian investment bank owned by billionaire Naguib Sawiris, recapped its view that that Monetary Policy Committee (MPC) of Central Bank of Egypt (CBE) will keep interest rates unchanged during February meeting and financial year 2018/2019. Beltone's expectation came as the inflation outlook will remain hostage to the uncertain trajectory of volatile food prices. The Central Agency for Public Mobilization and Statistics (CAPMAS) said on February 10 Egypt's annual consumer price inflation declined to 12.2 percent in January 2019, compared to 17 percent in January 2018. The report commented that monthly inflation started to gain momentum again, rising by 0.6 percent after two consecutive months of decline, yet still within the historical norms. It also attributed the rise in January's inflation rate to food prices due to a pick-up in vegetables and grains prices in particular. "We believe the two upcoming inflation readings remain a key check in the list we have been monitoring for an earlier interest rates cut in 1H19," Beltone stated in a report. Beltone thought that the slight inch-up in inflation reading does not pose risks on our inflation outlook and therefore, it reiterated its view that inflationary pressures will remain subdued over 1H19, particularly as the new low headline reading in December 2018 will accommodate inflation so as to remain within 14-15 percent throughout 2019. Beltone's also stated that its watch list includes: Foreign inflow in the fixed income in February to confirm the renewed investors' appetite in the fixed income market, affirming limited pressures on the local currency; and the rate of depletion in banks' NFAs, which started to ease in December 2018, defining the need to support the local currency. "We reiterate our view that treasury yields will remain persistently elevated, above the pre-interest rates cut, disregarding interest rates policy direction for various other reasons," the report read. The Monetary Policy Committee of the Central Bank of Egypt (CBE) kept the overnight deposit rate and the overnight lending rate at 16.75 percent and 17.75 percent, respectively, during December's meeting for the sixth time in 2018. Source: Egypt Today
