Egypt has a comfortable room to cut rates even after the markets were shaken after anti-government protests.
Analysts have lowered estimation on cuts, back to 100 bps from 150 bps before the protests last week. The adjustment was due to the two-day jump in EGP NDFs and fall in stocks early this week. But the movements have moderated, and the forwards stayed near the lowest levels in more than two years.
Inflation at the lowest since 2013 and Egypt’s high yields enabled room for a bigger cut to 150 bps without triggering outflows and harming the currency.
The Central Bank of Egypt (CBE)’s deposit rate is at 6.75% after inflation adjustment, among the highest in the world. The country’s three-month notes' real yield is at 8.7%.
As long as the protests do not change into something much bigger, Egypt will still be able to exploit the global hunt for yields.
