Egypt to Loosen Monetary Policy Soon, Central Banker Says

(Bloomberg) -- Egypt’s central bank plans to start easing monetary policy “soon,” once it’s convinced inflation has been reined in, Governor Tarek Amer said on Tuesday.

“We want to make sure inflation is under control before we move so we don’t have to go back,” Amer told reporters in Cairo during a conference on financial technology. The central bank’s Monetary Policy Committee, which has raised the benchmark interest rate by 700 basis points since the pound was floated in November 2016, is scheduled to meet Feb. 15.

Yields on Egyptian pound treasury bills have been falling over the past two weeks, suggesting the market anticipates a rate cut.

The currency liberalization was a key part of the government’s push to reform the economy and end a dollar shortage that had crippled business activity. While the move helped to secure a $12 billion International Monetary Fund loan, boost investor confidence and attract more than $19 billion in foreign money into Egyptian Treasury bills, it also halved the pound’s value to the U.S. dollar and sent prices soaring.

IMF Says Egypt Reforms on Track, Warns Against Premature Easing

Annual core inflation eased to about 20 percent in December after climbing to a record 35 percent in July, suggesting that the aftershocks of the flotation were wearing off. Economists have said they expect the central bank to start cutting interest rates now that the surge in prices has cooled.

Amer said foreign currency inflows into the economy since November 2016 have climbed to $100 billion -- offering further evidence that reforms were paying off in the Arab world’s most populous nation.

--With assistance from Tarek El-Tablawy

To contact the reporter on this story: Ahmed Feteha in Cairo at afeteha@bloomberg.net.

To contact the editors responsible for this story: Alaa Shahine at asalha@bloomberg.net, Amy Teibel, Kevin Costelloe

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