The Central Bank of Egypt’s (CBE) Monetary Policy Committee (MPC) will hold its third scheduled meeting of 2025 on Thursday to decide on key interest rates—an outcome closely watched as a benchmark for the short-term direction of Egypt’s monetary policy.
The meeting comes against a backdrop of divided expectations among analysts and investment banks over whether the MPC will hold rates steady or proceed with another rate cut.
At its previous meeting on April 17, the committee slashed rates by 225 basis points, bringing the overnight deposit rate to 25%, the lending rate to 26%, and both the credit and discount rate and main operation rate to 25.5%. The decision marked a notable shift toward monetary easing following a period of aggressive tightening.
In its statement at the time, the MPC described the cut as appropriate to maintain an accommodative stance aimed at anchoring inflation expectations and supporting the anticipated decline in inflation. It cited a sharp 9% drop in annual headline inflation during Q1 2025, which allowed for the beginning of a monetary easing cycle.
The committee projected a continued decline in inflation over the course of 2025 and 2026, albeit at a slower pace than in Q1, due to the impact of fiscal consolidation measures and a more gradual drop in non-food inflation. However, it cautioned that risks remain tilted to the upside, highlighting potential fiscal slippage, the uncertain trajectory of US-China trade relations, and intensifying regional geopolitical tensions.
The MPC reaffirmed its commitment to assessing the appropriate pace and duration of monetary tightening on a meeting-by-meeting basis, guided by forward-looking indicators and evolving risk assessments. It emphasized its readiness to use all available tools to ensure price stability and steer inflation toward its 7% (±2%) target by Q4 2026.
More recent data show inflationary pressures may be resurging. Core inflation, as measured by the CBE, rose to 10.4% in April from 9.4% in March, while monthly inflation increased to 1.2% from 0.9%. Separately, the Central Agency for Public Mobilization and Statistics (CAPMAS) reported annual urban inflation at 13.9% in April, up slightly from 13.6% in March, though the monthly pace eased to 1.3% from 1.6%.
Despite these short-term upticks, the CBE expects headline inflation to average 14–15% in 2025 and 10–12.5% in 2026, down from 28.4% in 2024. In its Q1 2025 monetary policy report, the bank reaffirmed that current monetary conditions remain conducive to the expected disinflation path. It also reiterated its goal of maintaining a positive real interest rate to help anchor inflation expectations and ensure a sustained reduction in underlying inflation.
Analysts remain split over what action the CBE will take on Thursday.
Heba Mounir, macroeconomic analyst at HC Securities & Investment, expects a 200 basis point cut, citing improved macroeconomic indicators, relative geopolitical stability, and enhanced FX liquidity. “While inflation remains above target, it’s on a downward trend—largely due to base effects—and the local debt market continues to attract foreign inflows,” she said.
A Reuters poll of 16 analysts forecast a 175 basis point rate cut, projecting deposit and lending rates to fall to 23.25% and 24.25%, respectively. James Swanston of Capital Economics echoed this view, arguing that Egypt’s real interest rate remains highly positive, providing ample room for monetary easing.
However, a poll by Asharq Bloomberg revealed a more cautious outlook. Of 11 investment banks surveyed, six predicted the CBE would hold rates steady, pointing to upside inflation risks driven by rising fuel prices and the uncertain impact on May’s inflation data. They also cited geopolitical concerns and the US Federal Reserve’s recent decision to pause rate cuts as reasons for a more conservative approach.
The remaining five banks expected cuts ranging from 100 to 200 basis points, arguing that the wide gap between nominal interest rates and inflation provides a rationale for further easing—even if moderate.
A similar split was observed in a CNBC Arabia survey of 14 economists and analysts. Half anticipated a rate hold to evaluate the full impact of April’s substantial cut, particularly in light of April’s inflation uptick. The other half predicted another cut to support economic activity and capitalize on easing global trade tensions.
All eyes now turn to Thursday’s decision, as the CBE weighs easing inflation against persistent risks in a complex and shifting global environment.
