Analysts expect CBE to hold rates on Thursday, with some warning a hike is back in play

Most analysts expect the Central Bank of Egypt (CBE) to keep interest rates on hold at Thursday’s Monetary Policy Committee meeting, with the government’s freeze on fuel prices through December keeping a lid on inflation for now. The overnight deposit rate stands at 19% against urban headline inflation of 13.9% in September, a real-rate cushion of about 5.1 percentage points. With the USD past EGP 55 and foreign investors selling local debt, analysts are divided on how long the CBE can stay on hold before a defensive hike comes back into play.

What’s changed since the last meeting: The USD hit a fresh high of EGP 55.89 at the CBE yesterday, days after crossing EGP 55 for the first time on Thursday and passing the previous peak of EGP 54.73 recorded on 7 April. Foreign and regional investors net sold USD 1.13 bn of local debt between Monday and Wednesday last week, while interbank transactions to fund exits from the secondary debt market reached USD 3.1 bn over the week, a banking source told us. The EGX30 fell 3.56% yesterday to its lowest since early April, with foreigners staying small net buyers of listed shares last week. Prices are also picking up m-o-m, with headline inflation at 1.3% in September, up from 0.1% in August, and monthly core inflation at 0.8%, up from 0.3%, CBE data shows.

The case for holding

The investment banks are lined up behind a hold. EFG Hermes expects one, since the decision to keep fuel prices unchanged “will keep inflation contained,” Head of Macroeconomic Analysis Mohamed Abu Basha tells EnterpriseAM. The weaker EGP could add to inflationary pressures, he says, “but it’s too early amidst the ongoing volatility and the geopolitical risks.” CI Capital’s Monsef Morsy also expects a hold, pointing to the last two monthly inflation readings and, “more importantly,” the indexation committee’s decision to keep oil product prices unchanged until December.

HC Securities expects a hold too, with Macro Analyst Heba Monir arguing in a note (pdf) shared with EnterpriseAM that Egyptian debt is still attractive to foreign investors. The latest 364-day T-bill yield of 25.91% implies a real return of 10.5% after the 15% tax on European and US investors, measured against her 11.5% inflation forecast for 2027. The EGP had lost c. 14% against the USD this year and c. 5% this month, even before yesterday’s move. “Although we see this depreciation wave as temporary, it could unfortunately persist until year-end,” she says. Geopolitical instability is adding to net foreign outflows, given Egypt’s heavy import bills for energy and wheat, its external debt dues, and payments owed to foreign oil companies, she says. The fuel freeze has brought her forecast for average inflation in 4Q 2026 down to c. 13% from 14.5%, while she has raised her 2027 average to 11.5% from 10.9%.

Al Ahly Pharos Head of Research Hany Genena calls a hike “a luxury Egypt cannot afford.” Faster monthly inflation, a record low EGP, and high energy prices are “mostly symptomatic of transient supply shocks that lack monetary validation,” he says. Hiking to compensate foreign investors for currency risk would be “expensive to execute,” he argues. Even if higher rates drew in more foreign money, commercial banks would likely park it abroad as net foreign assets, which wouldn’t ease pressure on the current account. Higher rates would also hit mid-size and small developers that rely on project finance, many of which are already struggling to deliver units with slow sales and overstretched installment plans.

The highest cost would land on the budget. Corridor rates already exceed nominal GDP growth by about 500 bps, Genena says, with interest payments consuming about 60% of central government revenue despite a 4.9% primary surplus in FY 2025/26. If foreign investors want higher returns to offset FX risk, treasury yields will adjust in the secondary market without the CBE raising corridor rates, he adds.

Economist Iten El Marghoushy expects a hold as well, citing the real-rate cushion and record reserves of USD 57.35 bn at end-September, though that resilience “remains dependent on foreign currency inflows and developments in the exchange rate.” A hike would do little against inflation driven by higher global costs, she argues. Banking expert Sahar El Damaty agrees a hold is the better option, given the CBE’s focus on containing inflation fueled by FX shortages and higher import costs. Foreign currency supply is well below demand, she tells EnterpriseAM, pointing to higher shipping, freight, and ins. costs in the Red Sea, which hurt exports, tourism, and Suez Canal revenues, and to higher US rates drawing portfolio money toward the US.

The risks to a hold

Deutsche Bank, which expects the CBE to keep its rate at 19%, sees the currency as the main risk to that call, according to a research note (pdf). Foreign investors held more than USD 25 bn in T-bills at end-June, the note says, pointing to the USD 13-14 bn drop in their holdings in March 2026 as an example of how much money could leave if sentiment sours again. A further build-up in pressure on the EGP, particularly alongside portfolio outflows, could prompt a hike to protect the real-rate buffer, the bank says. It has raised its end-2026 inflation forecast to 15.7% from 14.7%, expecting pass-through from the weaker EGP to more than offset the relief from unchanged fuel prices. That forecast assumes a 10-15% fuel price increase is pushed into 1Q 2027.

El Marghoushy would only see a hike coming if inflation overshoots expectations and eats up the positive real rate, with foreign investors exiting at a faster pace. Higher oil prices and geopolitical tensions “strengthen the case for caution but do not automatically require an immediate rate hike,” she says, with Brent hovering around USD 116-117 a barrel against the USD 75 the government assumed in its budget.

Former Industrial Development Bank chairman Maged Fahmy is the only analyst we spoke to who expects a hike on Thursday to limit hot-money outflows and keep local debt attractive against competing markets. A stronger USD raises the economy’s overall foreign currency needs on top of import costs, he tells EnterpriseAM, since Egypt imports much of its food, energy, raw materials, and production inputs.

When cuts come back

Those who gave a timeline don’t see cuts this year. Genena expects the CBE to stay neutral until year-end. Deutsche Bank expects a gradual resumption of easing in 1Q-2Q 2027, though it says the window for cuts has narrowed and the risks now point to a later start. El Marghoushy is more cautious still. “The decline in annual inflation alone is insufficient to justify resuming monetary easing,” she says, putting the more realistic window for cuts in 2H 2027, and only if regional tensions ease. That’s well behind the 300-400 bps of cuts next year that some international institutions had been penciling in, she adds.

The Fed is the other risk to watch. After a 25 bps hike in September to 3.75-4.00%, it’s widely expected to hold on 28 October, with a Reuters poll pointing to another hike in December. El Marghoushy expects a hike in December or early 2027, warning it could push investors to move more money out of Egypt into US assets. Another US hike would add to the pressure on emerging markets and make FX management harder, El Damaty says.