I wonder what will happen at the Central Bank’s Monetary Policy Committee meeting on November 21? Will there be a new reduction in interest rates as people expect, or will the surprises be anything other than that? Will the decision taken by the US Federal Reserve to reduce interest rates twice affect the direction of our central bank? Let’s talk a little about the expected scenarios in the next meeting
First, we must know that the US Federal Reserve, which is considered the largest central bank in the world, reduced interest rates twice this year with the aim of stimulating the economy and reducing inflationary pressures.
This step prepares the atmosphere for reducing interest rates in many banks around the world, including central banks in emerging markets, which always look at the Fed’s decisions as an indicator.
As for the Central Bank of Egypt, it is also one of the banks that is expected to reduce the interest rate in the coming period as part of a trend to support the economy and encourage investment, especially after inflation has decreased significantly in the last few months.
What are the expected scenarios at the November 21 meeting?
There are a number of important factors that the central bank takes into account when it decides to reduce interest rates, the first of which is, of course, inflation. Inflation in Egypt was declining this year, but we must take into account that there are global pressures, such as rising energy and commodity prices, which could affect local prices, and therefore the Central Bank will not rush into the decision to reduce interest rates unless it is certain that inflation will not increase again.
The second point is dollar flows. After the Fed’s decision to reduce interest rates, the return on investments in dollars became lower, and this prompted many investors to search for a better return in other markets such as Egypt, which has high interest rates compared to many banks. In Arabic, this means that the interest rate reduction, if it took place in Egypt, would be at a severe expense so that it would not affect the dollar flows entering the Egyptian market.
We have two main scenarios here
The first scenario, and this is what many people are betting on, is that the central bank can reduce interest rates by a small percentage, and this will contribute to stimulating the economy, encourage internal investment, and support companies and projects that rely on loans. It will also be a positive message that the Egyptian economy is in a reassuring and stable direction
As for the second scenario, it is that the central bank prefers to be fixed, meaning that it maintains interest rates as they are now without changing. This would happen if the central bank found that inflation could pressure again or if it saw that lowering interest rates could affect the flow of foreign currency.
In any case, the decision that will come out on November 21 will be an important indicator of the central bank’s upcoming policies, and it will also directly affect all of our pockets, whether those who have deposits in banks, or even the owners of projects and companies who are thinking about financing or loans.
So wait and follow us to see together what the Central Bank will do in the next meeting
