Economic expert Mohamed Fouad hailed the Central Bank of Egypt‘s (CBE) decision to reduce interest rates, given the decline in inflation rates and the fact that prices of some commodities have already declined.
During a phone interview with TV host Amr Adib on the “al-Hekaya” (The Story) show on Friday, Fouad added that a decline in inflation does not necessarily mean a decline in prices, but rather that the rate of price increases has slowed.
He explained that the CBE has long sought to control the market through its traditional and modern tools, such as raising interest rates and controlling liquidity, in addition to providing US dollars through official channels to importers.
Will the US dollar reach LE 40?
Fouad noted that these policies may lead to narrowing the gap between the official rate and the parallel market.
The US dollar reaching LE40 depends on a combination of global and local economic factors and is not simply an internal decision, he added.
The price of the dollar declining is wishful thinking, not a reality, he said, as it is governed by three factors: the availability of dollars, global prices, and hot money in debt instruments.
Fouad explained that reaching the LE 40 level for the dollar will not happen overnight, but rather requires an integrated system that includes increasing local production, expanding the export base, and reducing reliance on imports.
How will Certificates of Deposit be impacted?
Regarding the impact of the decision to reduce interest rates on Certificates of Deposit (CDs) within banks, Fouad said that fixed CDs will not be impacted by lower interest rates, but that new certificates will be linked to the newer interest rate.
He continued, “In my opinion, banks can absorb this reduction without offering significantly fewer certificates. They may wait for the CBE’s meeting.”
Edited translation from Al-Masry Al-Youm
