Egypt central bank to review key interest rates amid mixed expectations

Accordingly, the CBE’s overnight deposit rate, overnight lending rate, and the rate of the main operation stand at 21.00 percent, 22.00 percent, and 21.50 percent, respectively.

Inflation figures could influence easing
 

Banking Expert Hany Abou-El-Fotouh expected the CBE to either keep interest rates unchanged or opt for a limited cut of around 0.5 percent (50 bps) at its upcoming meeting on Thursday.

He argued that the recent rise in annual inflation to 12.5 percent, up from 11.7 percent in September, combined with a sharp monthly increase of 1.8 percent, leaves little room for aggressive easing.

While the CBE signalled a calculated shift toward monetary easing with its previous one percent cut applied in October, the persistence of price pressures, particularly in food and services, makes any bet on an automatic slowdown in inflation overly optimistic, Abou-El-Fotouh told Ahram Online. 

“This monthly pace represents a real challenge to any rapid rate cuts,” he said.

Despite the acceptable growth, Abou-El-Fotouh stressed that the negative output gap does not justify excessive easing, especially as imported inflationary pressures tied to supply chains and currency weakness remain.

He warned that over-cutting could deepen imbalances in the months ahead.

Abou-El-Fotouh sees stabilization or a modest reduction as the most likely outcome, while a larger cut of 0.75–1 (75–100 bps) percent is unlikely given accelerating monthly inflation. 

His analysis aligns with Fitch Ratings’ forecast that rates could decline to 21 percent by the end of 2025 and to 11.25 percent in 2026, with Egypt’s economy expected to grow between 4.3 and 5 percent annually from 2027 to 2034.

He identified two key factors shaping this outlook: gradual easing of inflation over the medium term and relative improvements in growth indicators, allowing for measured monetary easing without undermining price stability.

Moreover, risks from rising energy prices or further currency depreciation, which could push inflation beyond the Central Bank’s ability to manage, and structural pressures on rents and healthcare remain.

“In the end, CBE’s monetary policy must remain disciplined,” Abou-El-Fotouh stated. “Any rate cuts should not exceed what is consistent with preserving price stability, because controlling inflation is the essential condition for a sound economic recovery.”

At its sixth meeting of 2025 in October, the CBE described its one percent rate cut as consistent with maintaining an appropriate monetary stance, aimed at anchoring inflation expectations and supporting ongoing disinflation.

According to CBE, the scale and timing of further easing will be reviewed on a meeting‑by‑meeting basis, taking into account the forecast trajectory, incoming data, and the balance of risks.

The CBE also affirmed its commitment to monitoring economic and financial developments and adjusting policy tools as necessary to safeguard price stability.

Its medium-term targets remain steering inflation toward seven percent (±2 points) by Q4 2026 and five percent (±2 points) by Q4 2028, on average.

Keeping rates steady is an option
 

Banking expert Ahmed Shawky expected the CBE to keep interest rates unchanged at the Thursday meeting, as policymakers weigh renewed inflationary pressures against signs of external improvement.

“October inflation rose to 12.5 percent, up from 11.7 percent in September, driven mainly by a temporary fuel price shock and adjustments in consumer spending,” Shawky told Ahram Online.

He noted that while these short‑term pressures are evident, they coincided with improvements in external indicators, including stronger remittance inflows, tourism revenues, and a narrowing current account deficit.

Balancing price stability with growth
 

“The committee is seeking to balance price stability with sustainable growth,” Shawky said, pointing out that the previous 100‑basis point cut reflected a coordinated easing path for 2025.

Despite the recent uptick, he stressed that the overall inflation trend remains downward compared with 2024’s peak, supporting a more measured approach to monetary policy.

He added that the CBE's forecasts, 14 percent inflation in 2025 and 10.2 percent by end-2026, limit room for immediate, aggressive cuts. Fiscal consolidation, geopolitical tensions, and energy price risks continue to pose upside threats.

With economic activity growth reaching five percent, Shawky believes there is room for moderation in monetary policy, provided inflation expectations remain contained.

“The most likely scenario is to keep rates steady,” he said, adding that if the committee opts for a cut, it would be cautious and limited to around 50 basis points.