The banking sector and wider financial markets are bracing for the impact of the Central Bank of Egypt’s (CBE) surprise decision last Thursday to cut key policy rates by 200 basis points, with attention now focused on how the move will affect savings returns, lending costs, and government debt instruments.
The Monetary Policy Committee (MPC) reduced the overnight deposit rate to 22%, the lending rate to 23%, and both the CBE’s main operation rate and the discount and credit rate to 22.5%. These benchmark rates, known as the “corridor,” are the primary indicator of short-term interest rate movements in the Egyptian pound.
In an immediate response to the decision, yields on variable-rate savings certificates and certain loan products directly linked to the corridor declined automatically by 2%. Among the most prominent of these instruments are the National Bank of Egypt’s (NBE) Platinum certificate and Banque Misr’s Qimma certificate, as well as a wide array of floating-rate loans offered by commercial banks.
Mohamed El-Etreby, Chairperson of the NBE, confirmed that the bank’s Assets and Liabilities Committee (ALCO) would meet today, Sunday, to review rates on savings products in light of the CBE’s policy shift. Banque Misr announced that its own ALCO committee would also convene today to evaluate adjustments to its certificates and lending products.
The impact of the rate cut is not confined to the banking sector. Investors are closely monitoring how the move will influence yields on government treasury bills (T-bills) and bonds, as well as foreign appetite for Egyptian debt instruments. Lower interest rates generally reduce the cost of government borrowing but can also affect the attractiveness of local debt for international investors, especially in an environment of heightened global interest rate competition.
The Ministry of Finance is set to test the market this week with new issuances. On Sunday, it will auction two T-bill tranches worth a combined EGP 55bn: a 91-day issue valued at EGP 20bn and a 273-day issue worth EGP 35bn. This will be followed on Monday by four treasury bond auctions totalling EGP 24bn: a two-year issue for EGP 5bn, a three-year fixed-rate issue for EGP 13bn, a three-year variable-rate issue for EGP 5bn, and a five-year bond worth EGP 1bn.
The outcome of these auctions is expected to provide the first clear indication of how investors—both domestic and foreign—are pricing the new interest rate environment and whether the 2% cut will translate into lower government borrowing costs or affect demand for Egyptian debt.
