Egypt’s rate cut to boost property, gold and stock markets

Egypt’s central bank slashed key interest rates by 1.5% on Aug. 22, triggering public concerns about a possible depreciation of the local currency. As locals are seeking a haven from inflationary pressures of the US dollar, real estate, gold and the stock market emerge as plausible answers.

Amr Abol-Enein, managing director of CI Capital Asset Management, dismissed any fears of dollarization, citing Egypt’s improved macroeconomic indicators as the main drivers other than the interest rates.

“There will be no dollarization as the interest rates in Egypt are still high. The greenback exchange rate in Egypt is set by the country’s inflows, which have been on the rise since the currency float. An increase in exports, narrower gap in the trade balance, higher revenues from tourism and foreign direct investment may foster the greenback’s depreciation versus the pound,” Abol-Enein told Al-monitor. 

He forecast more monetary easing steps in the coming period as inflation is well contained below 10%.