CBE likely to continue with gradual monetary easing

The Central Bank of Egypt (CBE) cut interest rates by 50bps at Thursday’s MPC meeting after a six month pause to the loosening cycle. Policymakers are likely to remain cautious about future easing, but we think rates will be reduced gradually over the next year or so to support the economic recovery.
James Swanston Middle East and North Africa Economist
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Middle East Economics Weekly

Oil prices, UAE drone attack, Gulf monetary tightening

The recent upwards revision to our oil price forecast means that the window for looser fiscal policy in the Gulf will remain open for a little longer than we anticipated. One of the factors driving oil higher this week was the Houthi drone strike in the UAE, which highlighted the risks to the Emirates’ recovery – particularly the tourism sector. Finally, central banks in the Gulf will have to follow the Fed in tightening monetary policy – which now seems likely to start in March. That will add a headwind to non-oil sectors.

20 January 2022

Middle East Economics Weekly

Oil and Gulf fiscal policy, Egypt joins GBI-EM, Tunisia

We think that the recent rally in oil prices is likely to be short lived and, as prices fall back, the window for governments in the Gulf to loosen fiscal policy will shut. Elsewhere, Egypt’s inclusion in JP Morgan’s GBI-EM bond index at the end of the month could boost capital inflows, but also cause external imbalances to increase. Finally, despite some support from Saudi Arabia this week, the Tunisian government will still need to pass much-needed fiscal consolidation to repair its balance sheets. Otherwise, it will continue to edge closer to a sovereign default.

13 January 2022

Middle East Data Response

Saudi Arabia Consumer Prices (Dec.)

Saudi inflation edged up to 1.2% y/y in December and we think that the headline rate will drift a little higher over the first half of this year before stabilising at around 1.0-1.5% over the rest of 2022 and 2023. Drop-In: Neil Shearing will host an online panel of our senior economists to answer your questions and update on macro and markets this Thursday, 13th January (11:00 ET/16:00 GMT). Register for the latest on everything from Omicron to the Fed to our key calls for 2022. Registration here.

13 January 2022

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Middle East Data Response

Egypt Consumer Prices (Jun.)

Egypt’s headline inflation rate edged up to 4.9% y/y in June and is likely to increase further over the coming months. Against this backdrop, we think the Central Bank of Egypt (CBE) will keep interest rates on hold until later in the year.

8 July 2021

Middle East Data Response

Whole Economy PMIs (Jun.)

June’s whole economy PMIs for the Gulf were a mixed bag, although one common thread was that weaker external demand offset a pick up in domestic demand. Strong vaccine rollouts mean that most virus restrictions will be lifted in the coming months, paving the way for a further pick-up in domestic activity.

5 July 2021

Middle East Economics Weekly

Saudi transport & labour market, Egypt CA deficit

The National Transport and Logistics Strategy launched in Saudi Arabia this week is the latest effort to boost the Kingdom’s non-oil sector, but it will raise more concerns whether resources are being misallocated. Meanwhile, the Kingdom’s unemployment rate fell further in Q1, which has been mostly driven by improving labour market outcomes for Saudi women – an encouraging sign that social reforms are having positive effect. Elsewhere, the widening of Egypt’s current account deficit to its highest level in nearly four years in Q1 reinforces our concerns that the pound is looking overvalued.

1 July 2021
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