The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) is set to hold its second regular meeting of the year on Thursday, to decide on the fate of the CBE’s key interest rates, which serve as the primary benchmark for the short-term interest rate direction of the Egyptian pound.
This meeting comes amid strong expectations of a rate cut ranging between 1% and 3%, following a significant decline in the inflation rate.
Earlier this month, the Central Bank reported that the annual core inflation rate fell to 9.4% in March 2025, down from 10% in February. The monthly change in the core consumer price index, prepared by the CBE, recorded an increase of 0.9% in March 2025, compared to 1.6% in February 2025 and 1.4% in March 2024.
At its previous meeting held on 20 February, the MPC decided to keep the CBE’s key interest rates unchanged for the seventh consecutive time, maintaining the overnight deposit rate at 27.25%, the overnight lending rate at 28.25%, and both the main operation rate and the discount rate at 27.75%.
In the statement accompanying that decision, the committee pointed to heightened upside risks to inflation compared to its meeting on 26 December 2024, attributing these risks to increased uncertainty surrounding global and regional outlooks. This was particularly influenced by the impact of protectionist trade policies adopted by the United States and rising geopolitical tensions.
The committee noted that, in light of prevailing uncertainty, maintaining the CBE’s key interest rates at their current levels was appropriate at that time in order to uphold a restrictive monetary policy stance. This, it said, was necessary to ensure a significant and sustainable decline in inflation and to anchor inflation expectations.
It affirmed that it would continue to assess the appropriate timing for the start of the monetary easing cycle on a meeting-by-meeting basis, emphasizing that future decisions would be guided by updated expectations, surrounding risks, and newly emerging data. The committee also stressed its commitment to closely monitoring economic and financial developments and evaluating their potential impact on macroeconomic indicators. It reiterated its readiness to use all available tools to bring inflation back to its target range by curbing demand-driven inflationary pressures and containing the secondary effects of supply-side shocks.
Twelve investment banks have expressed a consensus view that the CBE is likely to cut interest rates in its meeting on Thursday, supported by the recent deceleration in inflation. However, their forecasts are tempered by caution amid ongoing uncertainty in global trade, following the United States’ recent tariff measures and subsequent global reactions.
The banks include HC Securities, EFG Holding, Beltone, Al Ahly Naeem, Zeila Capital, CI Capital, Al Ahly Pharos, Prime Holding, Mubasher Financial Services, Thndr, Cairo Capital, and Arabeya Online. They anticipate a rate cut ranging from 100 to 300 basis points, driven by the accelerated slowdown in Egypt’s inflation rate over the past three months.
A Reuters poll also predicted that the CBE would lower interest rates by 2% at its upcoming meeting. The poll included 17 economists and analysts, the majority of whom expect a 2% cut in the key policy rate. One participant anticipated a more aggressive 4% cut, while another projected that rates would be held steady.
Pascal Devaux, an analyst at BNP Paribas, stated that the recent decline in inflation and the rise in real interest rates warrant a rate cut by the CBE. However, he noted that such a move should be implemented gradually, given the challenges of managing inflation in the context of increased global economic volatility.
James Swanston, an analyst at Capital Economics, also expects a 2% rate cut, remarking: “Amid global uncertainty and the trade war between the US and China, the path for future rate cuts may be more cautious than previously expected.”
Heba Mounir, a macroeconomic analyst at HC Securities and Investment, anticipates that the CBE will cut interest rates by 150 basis points (1.5%) at Thursday’s meeting, taking into account the latest developments in Egypt’s macroeconomic environment and the current geopolitical climate.
Mounir noted that while Egypt’s inflation rate remains above the CBE’s target range, it is on a clear downward trajectory, largely due to base-year effects. She also highlighted Egypt’s continued appeal to foreign investors seeking high-yield opportunities, as well as the improvement in the banking sector’s net foreign asset position. This improvement, she said, has allowed for a stable and safe exit for some foreign investors from the Egyptian debt market.
As a result, she expects the MPC to opt for a 150 basis point cut in order to support domestic economic growth, while also considering ongoing global recessionary concerns and the need to strike a balance between supporting activity and containing inflation.
