Central Bank believes EGP's real exchange rate appreciation will not hurt competitiveness
Egypt’s improved competitiveness after the 3 Nov floating of the currency is unlikely to be negatively affected by an expected appreciation of the pound’s real effective exchange rate (REER) in the short term, the Central Bank (CBE) said its first Monetary Policy Report. The expected gains in the pound’s REER will not "neutralize the substantial real depreciation" that took place in November and December, according to the CBE. Egypt has been realising the benefits of the flotation, including improvements in the balance of payments and the buildup of foreign reserves, while the inflationary pressures associated with the move "are subsiding," the regulator said, adding that it expects monthly inflation to "normalise," while the annual rate will "remain elevated." The CBE did not provide an inflation forecast, but on 30 March the Ministry of Finance said it expected the annual rate to average 15.2% in FY17/18.
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