The Central Bank of Egypt (CBE) cut interest rates by 100 bps in its third meeting of the year on Thursday, the bank said in a statement (pdf). The move marks the Monetary Policy Committee’s (MPC) second consecutive change to the policy rates since March 2024, following seven consecutive meetings where rates were held steady. It is also the bank’s second rate cut since November 2020.

Where rates currently stand: The overnight deposit rate now stands at 24.00%, the overnight lending rate at 25.00%, and the main operation and disc. rates at 24.50%.

“The moderating trend in headline and core inflation, coupled with easing underlying dynamics, suggests an improvement in inflation expectations,” the MPC said, noting that inflation is predicted to further dip throughout the remainder of 2025 and 2026, “albeit at a constrained pace given the expected drag from implemented and planned fiscal consolidation measures in 2025, in addition to the relative persistence of non-food inflation.”

REMEMBER- Annual urban inflation rose for the second month running in April to 13.9%, marking a 0.3 percentage point increase from the 13.6% recorded in March. On a monthly basis, inflation eased by 0.3 percentage points to 1.3%.

Most economists and analysts we polled last week saw this coming, with most expecting the MPC to cut rates by around 100-200 bps. Driving the predictions was a viewpoint that an additional rate cut would help “stimulate economic growth, given a relative stability in the domestic and international economic conditions compared to the previous month,” HC Securities’ Heba Mounir told us. Ahly Pharos’ Hany Genena added that real interest rates are nearing 10%, global commodity prices are steady, and the EGP is appreciating, all factors that strengthened the case for a cut, he said.

But the cut was on the lower end of expectations, which Genena told us is to account for a slight uptick in inflation in April to still keep a comfortable margin for monetary policy actions further on. But despite the acknowledgment of risks, what stood out was the bank’s commitment to — and confidence in — continuing the easing cycle amid a more supportive macroeconomic environment, according to Genena. “There is no longer hesitation,” he explained, pointing to how despite the existence of risks, the general direction remains firmly fixed in the general direction of continuing the monetary policy easing cycle.

Analysts told us that they see monetary loosening continuing through 2025, including Capital Economics’ Jason Tuvey, who saidin a commentary that “there’s scope for much more monetary loosening by year-end” as inflation continues to ease. Capital Economics sees the bank’s overnight deposit rate falling from its current 24.00% to a “below-consensus” 17.00% by the end of the year — representing a sizable 7 percentage point cut in total over the five remaining MPC meetings of the year. Mirroring this perspective, Genena told us that Ahly Pharos sees cuts ranging from at least 4 to 5 percentage points, which could increase with Opec production hikes, which are expected to lower fuel prices.

The move caught the attention of some corners of the global press: Bloomberg, Reuters.

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