Most analysts see the MPC beginning its easing cycle this week: Almost all analysts surveyed by EnterpriseAM expect the Central Bank of Egypt (CBE) to cut interest rates when its Monetary Policy Committee (MPC) meets on Thursday.

The only real question: The size of the cut. Most of the analysts we spoke to predict the MPC to cut rates by at least 200 bps, while others gave a more conservative estimate of a 100 bp cut as the CBE continues to monitor inflationary pressures.

Where rates currently stand: The overnight deposit rate stands at 27.25%, the overnight lending rate at 28.25%, and the main operation and disc. rate at 27.75%. Rates have remained unchanged since the committee delivered a 600 bps rate hike following a surprise monetary policy meeting in March 2024, which was accompanied by the float of the EGP and the approval of a larger loan package from the IMF.

The central bank has left interest rates on hold since its March 2024 rate hike — leaving them untouched at seven consecutive meetings.

Annual inflation ticked up slightly last month: Annual headline urban inflation hit 13.6% in March, marking an 0.8 percentage point increase from the 12.8% recorded in February, ending a four-month-long downward trend. “This came on the back of rises in bread and cereals, vegetables, and in particular fruits inflation which surged to a record high of 88.0% y-o-y,” Capital Economics’ James Swanston wrote. EFG Hermes’ Mohamed Abu Basha, economists Hany Abou El Fotouh and Mona Bedair, as well as HC Securities’ Heba Mounir similarly highlighted fruit prices during Ramadan as a driver of the increase. On a monthly basis, inflation edged up by 0.2 percentage points to 1.6%.

The easing cycle is expected to come despite the rise in inflation last month: “Despite the pick-up in inflation reading for March, and given US President Donald Trump’s decision to freeze the tariffs for 90 days (except for the Sino side), something that might give a breather for the markets, we still believe the CBE has the room to ease by up to 200 bps in its upcoming meeting on 17 April,” Al Ahly Pharos’ Esraa Ahmed tells us.

This sentiment was echoed by HC Securities’ Heba Monir, who said that Egypt’s “carry trade is still attractive, and there is a noticeable improvement in the NFA position of the banking sector, allowing the smooth recent exit of some foreign investors from our treasuries market,” she told EnterpriseAM, penciling in a 150 bps cut. “March inflation uptick was very mild and should not prompt the authorities to delay the easing cycle anymore,” Thndr Securities Brokerage’s Amr El Alfy told us.

The specific factors behind last month’s inflation figures shouldn’t be cause for concern for the MPC: Capital Economics’ James Swanston expects policymakers to “look through the increase in inflation in March given it was driven by food prices.” However, “the backdrop of global uncertainty created by the US-China trade war means that there’s a risk officials move more slowly with monetary easing than we currently anticipate,” he added.

Real interest rates could push the MPC to cut rates: “Inflation should oscillate around the 13.5% y-o-y level in the near term. Real interest rates are close to 14%, providing scope

for the interest rate easing cycle to commence,” Oxford Economics wrote in a research note seen by EnterpriseAM. However, it could lead to a less significant cut, economist Hany Abou El Fotouh told EnterpriseAM, explaining that “the high real interest rate supports a limited cut without affecting the attractiveness of investment in local debt instruments.”

Fuel price hikes make matters more difficult for the committee: The recent increase in fuel prices at the pumps by 11.8-14.8% “is expected to lead to higher inflation rates in the coming months, which may push the central bank to adopt a more conservative approach and be cautious in cutting interest rates, even if it currently has some room to maneuver. The central bank may prefer to wait and assess the actual impact of the fuel price hike on inflation before taking any steps to ease monetary policy,” Abou El Fotouh said.

The impact of the fuel price hikes on the inflation trajectory could be minimal in the longer term: The decision to raise fuel prices will “undoubtedly have a direct and indirect impact on raising the general inflation rate in the coming period by a range of 1.5-2%. This means the annual general inflation rate could potentially rise to around 15.5%.” banking expert Mohamed Abdel Aal told us. However, he added that he sees inflation continuing “on a downward trend provided that global and regional geopolitical conditions remain stable.”

Meanwhile, EFG Hermes’ Mohamed Abou Basha told us that the fuel price hikes won’t change the overall inflation trajectory. “The hike is almost identical to that in October, coming pretty much in line with our projection; hence, it confirms our view that headline inflation would end the year at 12-13%,” he said, penciling in a hike of 200-300 bps.

A decision to hold rates could signal uncertainty over the macro outlook: “Should the CBE choose to delay action out of excessive caution, it could unintentionally raise questions about the perceived visibility of risks or confidence in the macro outlook. In the current environment, credibility is reinforced by clarity — not hesitation,” Bedair said.

However, some see the MPC once again holding rates: Economic analyst Dina El Wakkad told us that she sees the MPC moving to hold rates during its next meeting due to persisting inflationary pressures, the instability of the EGP, and the instability in the global economy, she said, adding that she doesn’t rule out a 100 bp cut. London-based IBIS Consultancy economist Ali Metwally was similarly uncertain on the matter, telling us that “following the recent US decisions regarding tariffs and the Federal Reserve's decision to hold interest rates steady, the uncertainty for the CBE has increased,” adding that projections are 50/50 over the possibility of a cut.

Looking ahead: In the long term, credit ratings agency Fitch Solutions sees rates being “cut to a level consistent with a real rate of near 4% by end-FY 26, underpinning a rapid fall in debt interest costs (given the average maturity of domestic debt is under two years),” it said in a commentary over the weekend. Meanwhile, Capital Economics sees “further loosening over the rest of this year, taking the policy rate to 17.25% by year-end,” Swanston wrote. Abou Basha gave a more conservative estimate, telling us that he sees the CBE cutting rates by a range of 5-6% percentage points over the course of 2025.

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