HC Securities & Investment expects that, with inflation remaining within the CBE target of 9% (+/- 3%) for 4Q20, the CBE to maintain rates unchanged in its upcoming meeting next Thursday.  

Chief Economist at HC, Monette Doss said: “We believe that inflationary pressures are mainly driven by increasing prices of necessary goods, namely food items, due to relatively higher demand during the month of Ramadan and the panic demand following the imposition of curfew in Egypt. Less working hours has also disrupted production activity possibly leading to relative supply shortages of some goods also posing inflationary pressures”.

 “We estimate foreign portfolio outflows from the Egyptian government debt during March and April at USD16bn-USD17bn. Maintaining interest rates at current levels imply a positive real return of 1.1% on 12-month T-bills, given 12-month T-bills of 12.6%, 15% taxes on treasury income and our average inflation estimate of 9.6% over the coming 12 months.”, Doss added.

It is worth mentioning that, in its last meeting on 2 April, the Central Bank of Egypt’s (CBE) Monetary Policy Committee (MPC) decided to keep rates unchanged after undertaking a 300bps rate cut on 16 March in an unscheduled meeting.  Egypt's annual headline inflation accelerated to 5.9% y-o-y in April from 5.1% y-o-y in the previous month, with monthly inflation increasing 1.3% up from 0.6% increase in March, according to data published by the Central Agency for Public Mobilization and Statistics (CAPMAS).

- Ends -

About HC SI:

HC Securities & Investment (HC) is a leading investment bank in Egypt and the MENA region. Since its inception in 1996, HC has utilized its relationship-driven insights, local and regional market knowledge, and industry-specific expertise and strong execution capabilities to provide its clients with a wide range of services in investment banking, asset management, securities brokerage, research, custody, online trading and private equity through its offices in Egypt and the UAE (DIFC). HC Investment Banking has an outstanding track record of advising leading corporates in Egypt and the MENA region on M&A, capital market, and financing transactions in excess of USD5.8bn. HC Asset Management, winner of the 2018 MENA Fund Manager Awards, now manages 12 mutual funds for commercial banks and portfolios for institutions and sovereign wealth funds with assets under management in excess of EGP7bn. HC Brokerage is ranked among the top brokers in Egypt and provides a wide array of services, including research and online trading to institutional and retail clients.

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