POLL-Egypt's central bank expected to cut rates for second time

Nine out of 11 economists polled by Reuters said the bank on Thursday will cut the deposit and lending rates, currently at 17.75 and 18.75 percent, by 100 basis points.

  
Central Bank of Egypt's headquarters is seen in downtown Cairo, Egypt March 8, 2016. Image used for illustrative purpose.

Central Bank of Egypt's headquarters is seen in downtown Cairo, Egypt March 8, 2016. Image used for illustrative purpose.

REUTERS/Mohamed Abd El Ghany

CAIRO - Egypt's central bank is expected to cut its key interest rates for the second time in a row at its meeting on Thursday, a Reuters poll showed on Tuesday, as inflation dropped to its lowest in more than a year.

Nine out of 11 economists polled by Reuters said the bank on Thursday will cut the deposit and lending rates, currently at 17.75 and 18.75 percent, by 100 basis points.

The central bank raised key rates by seven percentage points after it floated the currency to combat soaring inflation. It cut them by one point last month.

Inflation climbed after Egypt floated its currency in November 2016, reaching a record high of about 35 percent in July following cuts in energy subsidies. It has gradually eased since.

Annual urban consumer price inflation fell to 14.4 percent in February while core inflation, which strips out volatile items like food, fell to 11.88 percent.

"The consecutive and steep falls in headline and core inflation is assuring, especially with the latter declining to 11 percent last month," said CI Capital senior economist Hany Farahat.

"It's close to the central bank's lower bound target of 10 percent, which justifies another one percent cut in policy rates this month in our view," he added.

Egypt's economic growth has slowed since a 2011 uprising drove foreign investors and tourists away, but economic reforms tied to a three-year International Monetary Fund agreement signed in 2016 have led to positive economic indicators.

"Last month's rates cut was a positive step, but we'd like to see the rates go down further," said Mohab Ghali, Hilton vice president operations for Egypt and North Africa.

High interest rates have over the past year hit businesses' ability to borrow from banks and thus hampered their expansion plans.

(Reporting by Arwa Gaballa, editing by William Maclean and Larry King) ((mailto:arwa.gaballa@thomsonreuters.com; +20 2 2578 3290;))

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