Rate Cut Supports Bearish EGP View, More To Come

In line with our expectations, Egypt's central bank cut rates at yesterday's meeting, albeit exceeding our 50bps forecast with a full 100bps reduction. The move takes the lending and deposit rates to 12.5% and 10.5% respectively, and indicates some urgency on the part of the central bank. We maintain our end-2009 forecasts of 11.0% and 9.0%, but see potential for even further downside, given the deteriorating growth outlook and falling inflation. Lower interest rates and a negative growth and balance of payments outlook all support our bearish EGP view: we see the unit testing support at EGP5.60/US$ over the coming

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