VZCZCXYZ0000
PP RUEHWEB

DE RUEHEG #0534 0881112
ZNR UUUUU ZZH
P 291112Z MAR 09
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC PRIORITY 2022
INFO RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

UNCLAS CAIRO 000534 
 
SIPDIS 
 
DEPT FOR NEA/ELA 
TREASURY FOR BRYAN BALIN AND FRANCISCO PARODI 
 
E.O. 12958: N/A 
TAGS: ECON EAID EFIN EINV PGOV EG
SUBJECT: EGYPT: CENTRAL BANK CUTS RATES AGAIN 
 
REF: A. 09 CAIRO 282 
     ¶B. 09 CAIRO 476 
 
¶1. (U) At the March 26 meeting of its Monetary Policy 
Committee (MPC), the Egyptian Central Bank (CBE) cut its 
overnight lending rate, deposit rate, and the discount rate 
by 50 basis points each. Following this cut, the lending and 
deposit rates stand at 12% and 10% respectively with the 
discount rate at 10%. This move follows a 100 basis point cut 
by the MPC in February (reftel A) and continues an easing 
cycle that acknowledges both lower inflation and a slowing 
economy. 
 
¶2. (U) In its statement, the MPC cited the 10.1% cumulative 
drop in headline CPI inflation over the last six months and a 
lower GDP growth rate of 4.1% in Q2 2008/9 (Oct-Dec 2008) 
compared to 5.8% in Q1 and 7.7% in Q2 2007/8.  The statement 
also highlighted lower exports, reduced Suez Canal activity 
and slower growth in the Egyptian manufacturing sector. 
 
¶3. (U) Many analysts had expected the CBE to cut rates by 100 
basis points, and it's likely that a slower-than-expected 
drop in the rate of inflation for foodstuffs along with 
continued GOE interest in controlling the devaluation of the 
Egyptian pound (reftel B) may have limited this month's cut. 
The MPC statement projects that "annual inflation will fall 
towards the CBE's comfort zone by mid-2009." 
 
¶4. (U) The CBE will likely continue cutting rates throughout 
the first half of the year.  In its statement, the MPC cites 
"dire prospects for global growth" as likely to put pressure 
both on exports and domestic growth. As inflation continues 
to ease towards single digits, interest rates will likely 
follow. 
SCOBEY