Egypt's central bank changed the date of its monetary policy meeting scheduled for Dec. 26 to Jan. 16, 2020 saying this would be "after the approval of the formation of the Board of Directors and the Monetary Policy Committee for the new term."
On Nov. 28 Egypt's parliament approved the re-appointment of Tarek Amer for his second and final 4-year term as governor of the Central Bank of Egypt (CBE), only weeks after a reshuffle of the bank's board with one deputy governor reappointed, another one replaced and the appointment of three new board members.
Amer took over CBE in November 2015 following the resignation of Hesham Ramaz and has been credited with reforming and modernizing the country's banking system. This year he won the African Banker Award as best governor and was also named as one of the top 21 governors in the world in 2019 by Global Finance magazine.
Egypt's economy was hit hard by the Arab Spring in 2011, which ended Hosni Mubarak's 30-year rule, as it scared off foreign investors and tourists, resulting in persistent currency shortage.
As CBE's reserves continued to dwindle, the Egyptian pound came under attack but CBE was resistant to devalue to avoid sparking inflation, hitting the country's poor.
But after taking over CBE, Amer soon began to overhaul its policy, devaluing the pound by 12 percent in March 2016 and began a major reform to the foreign exchange market to preserve dollars and attract funds from abroad.
Shortly after Egypt and the International Monetary Fund (IMF) began talks to shore up the government's economic reform program that was aimed at boosting economic growth, lowering budget deficit and debt, improving the foreign exchange market and strengthening the social safety net.
As part of the 3-year, $12 billion agreement, which included the roll back of government subsidies and the introduction of value-added tax, Amer then floated the pound in November 2016.
The pound immediately lost about half its value, boosting inflation to 33 percent in July 2017 with the result CBE raised its key interest rates by 400 basis points that year to curb the pass-through of higher import prices to overall inflation.
After the initial shock, inflation decelerated during the second half of 2017 but remained high the following year, boosted by the rise in prices as subsidies were rolled back. As a result CBE only lowered its rate 200 basis points in 2018.
By early 2019 the Egyptian pound began to rise and by June headline inflation finally fell below 10 percent for the first time in 3 years, paving the way for CBE to begin a more aggressive easing.
So far this year CBE has cut its rates four times, most recently in November, by a total of 450 basis points, and analysts had expected another cut today in light of the steady decline in inflation.
Due to base effects, inflation rose to 3.6 percent in November from 3.1 percent in October and is expected to rise in December but still remain below CBE's inflation target of 9.0 percent, plus/minus 3 percentage points, in the fourth quarter of 2020.
Egypt's pound was trading around 16 to the U.S. dollar today, up 11.9 percent this year.
CBE's four main interest rates - the overnight deposit rate, the overnight lending rate, the rate on its main operation and the discount rate - currently stand at 12.25 percent, 13.25 percent, 12.75 percent and 12.75 percent, respectively.
www.CentralBankNews.info
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