Resuming the easing cycle? Almost all of the analysts surveyed by EnterpriseAM see the Central Bank of Egypt resuming its easing cycle this week when its Monetary Policy Committee (MPC) meets on Thursday. Eleven of the economists and banking experts we spoke to forecast a rate cut between 100-300 bps, while only one analyst sees the CBE holding rates unchanged.

Setting the tone for Abdalla’s new term: The meeting comes a few days after Hassan Abdalla was reappointed as the acting governor of the Central Bank of Egypt for another one-year term.

REMEMBER- The CBE kept interest rates unchanged in its fourth meeting of the year in July. The move marked a halt in the MPC’s easing cycle, after it cut rates by 225 bps in April and 100 bps in May.

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

A 300 bps rate cut is in the cards: There is a 50% probability that the CBE will cut interest rates by 300 bps during its meeting, Ahly Pharos Head of Research Hany Genena told EnterpriseAM. “While seemingly high in terms of magnitude, a 300 bps cut would keep real rates at an extremely high level of 9.0% and only reverse the jumbo rate hike of 6 March 2024 (+600 bps) when added to cumulative rate cuts of 2Q 2025,” Genena noted.

This forecast is mainly driven by expectations of easing inflation: Genena expects August urban inflation rate to either remain flat or fall 0.2% m-o-m and accordingly the annual rate to decelerate further to 11.5-12.0%.

REFRESHER- Annual headline urban inflation cooled further in July by a whole percentage point, falling to 13.9% from 14.9% in June. The rate of inflation is now at its slowest pace since March 2025.

Among the big cut supporters is Professor of Economics Medhat Nafei, who anticipates an easing of 100 to 300 basis points. ”The committee’s decision will ultimately hinge on the available data,” he said, adding that favorable inflation data suggest a big cut, while net outflows of hot money point to a more gradual reduction.

The rationale: “This easing is crucial for lowering the real interest rate on Egyptian debt instruments, which will remain positive even after the expected cut. It will also help reduce financing costs, which is vital for improving the business environment and stimulating investment-led growth” Nafei said.

While the projected reduction in the real interest rate comes at a time of increasing risk appetite for debt instruments in emerging markets, including Egypt, “this trend makes investors more willing to accept a relatively lower real interest rate, as long as it remains positive, even with higher risk,” Nafei added.

“We see room to lower interest rates in the next meeting,” Head of Research at Beltone Holding Ahmed Hafez told us, anticipating a 200-250 bps rate cut. “There will be increases in the prices of gasoline, electricity, and rent, and most likely cigarettes, as well as the annual increase in school tuition. We believe that even with these rises, inflation will be within the [CBE] target range by the end of 2026.”

EGP gains can also play a role: EFG Hermes projects a 100 bps rate cut in the coming meeting sees that a stronger EGP “provides comfort on the inflation outlook; on the other hand, it leaves the CBE to worry less about the impact of a cut in portfolio flows (with foreign holdings rising well above the USD 20 bn mark,” according to a recent research note seen by EnterpriseAM.

Despite the anticipated hike in energy prices, HC sees that there is room for a 200 bps rate cut, citing the recent inflation deceleration and the need to stimulate economic growth and ease the burden on the private sector, HC Securities’ Heba Mounir told EnterpriseAM. “The relative stability in Egypt’s external position, the deflationary effect of the recent EGP appreciation, and the still attractive carry trade” also support a rate cut, she added.

Against the tide: Economist and business advisor at Kent Business College, Ali Metwally, foresees the CBE holding rates steady in Thursday’s meeting. With IMF’s combined fifth and sixth reviews now expected in September or October and fuel and electricity hikes pushed back, “the MPC has space to wait, protect the carry trade, and reassess in October.”

BEYOND THIS WEEK’S MEETING-

The rate path over the year: Capital Economics’ James Swanston sees the CBE delivering a further 400 bps of interest rate cuts before the end of the year, bringing the overnight deposit rate to 19.0%. This projection assumes that headline inflation keeps slowing, reaching around 10% y-o-y, factoring in a possible hike to fuel prices before the year closes. Meanwhile, Hafez forecasts 450 bps in rate cuts for the remainder of the year, including the cut expected in the upcoming meeting.

A different outlook: Metwally sees a cumulative 100-150 bps reduction in interest rates in 4Q 2025. This easing is expected to be “delivered in one or two moves (October, then December if disinflation holds and FX stays orderly).” Meanwhile, EFG Hermes expects the CBE to hold rates during one of the three meetings scheduled for 4Q 2025, likely around the time of the fuel price hike, projecting a 100-200 bps in rate cuts for the remainder of the year, not including the August meeting.

Inflation outlook: Headline inflation is expected to average 13-14% in the second half of the year, before easing to 12-13% by December, assuming no large utility shocks, Metwally said. Meanwhile, EFG Hermes sees inflation slowing down and ending the year at around 13-14%. “Both August and September are likely to be quiet months before action resumes in October, when the government is set to deliver its final fuel price hike, which would take prices to cost-recovery levels,” the note read.

What is next for EGP? “While there does appear momentum toward a stronger EGP, our expectation is that it will gradually weaken over the rest of this year and into 2026,” Swanston told us. However, any depreciation is expected to be moderate and reflecting a rebound in the USD and not weakness of Egypt’s external position and currency, he added.

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