Beltone declared that the decision of the Egyptian government to fix the price of 95 octane at the current level of EGP 7.75 per litre until the end of June 2019 supports the chance for a 1% interest cut during the meeting of the Monetary Policy Committee (MPC) planned to be held on 23 May 2019, based on the inflation readings over the two upcoming months.
In a research note, Beltone added that the scenario most likely to happen is reducing the interest rates by 1% at the end of this year, which would delay the appetite of domestic investment and make the economy mainly rely on major projects.
According to Beltone, the decision to fix the price of 95 octane came in line with its forecast, noting that Beltone expects an increase in the prices of local petroleum products, with expanding the application of the automatic pricing mechanism to maintain the current consumption pattern which would help achieve savings in the support bill in the budget.
“We believe that making this decision is the result of the increase in the value of the pound in the first quarter (Q1) of 2019 by 2%, which has helped reduce the cost of 95 octane despite the increase in petroleum prices by 11%,” Beltone stated.
The report confirms the vision of Beltone to contain inflationary pressures in the first half (H1) of 2019. Beltone also expects an increase in general inflation rates between 2.5-3.5%, as a result of expanding the implementation of automatic pricing mechanism of fuel in Q3 of 2019.
Beltone also expects an increase of fuel prices by an average of 20.6% as the government nears its aim to cover the cost of petroleum products entirely, compared to an average increase in all petroleum product prices by 47.2% in June 2018.