Regional central banks are in a synchronized rate hold

The region’s central banks are in a synchronized hold on rates. The Central Bank of Egypt’s Monetary Policy Committee (MPC) held rates for the fourth time on Thursday, keeping the overnight deposit rate at 19.0% and the lending rate at 20.0%. Turkey’s central bank held its one-week repo at 37% at its 13 August review, its fifth consecutive hold since a January cut. Tunisia also kept its key rate at 7.0% on 29 July, extending a pause that has now run through most of the year.

The GCC is sitting out August entirely, as is the US Fed. With the Federal Open Market Committee (FOMC) holding the US rates’ range at 3.50–3.75% in both June and July, the USD-pegged GCC central banks have had nothing to react to. Saudi’s SAMA is at 4.25% repo, the UAE’s at 3.65% base rate, Qatar at 3.85% deposit / 4.10% repo, and Bahrain at 4.25% overnight deposit — all unchanged since the Fed’s June pause. Kuwait and Morocco, which manages against a basket rather than a straight USD-peg, have stayed put, with Attijari Global Research expecting in a last June note that Morocco’s hold will run through year-end.

The story behind the synchronized hold isn’t the same in every market. Egypt is holding because disinflation has stalled — July urban inflation ticked back up to 14.9%, and the CBE's own base case still sees inflation averaging 16.6% in FY 2026/27 before returning to target in 2H 2027. Turkey is holding at 37% because inflation is still running above 32% and the CBRT is trying to protect a disinflation path it has barely begun. Tunisia is holding to consolidate the gains from two cuts in 2025 without choking off an economy the EBRD expects to grow around 2% this year. And the GCC and Jordan are holding by virtue of the USD-peg.

All eyes will turn to the US Federal Reserve for its September 17 decision. While initial forecasts were penciling in a cut before the end of the year, this is now increasingly unlikely due to inflationary pressures and supply shocks caused by the US’ war in the region — and despite Trump’s repeated political pressures on the Fed. Prediction markets now put a hold as the most likely possibility, whereas a hike of 25 bps is at 30% and a cut possibility at just 1%. JP Morgan Wealth Management shifted its base case to a September hike in early August.

We may have early signals about the direction of the Fed later this week, when Chair Kevin Warsh delivers his first Jackson Hole keynote on Friday.

IN CONTEXT- A hike would move the GCC pegs within 24 hours and tighten the external environment for the disinflation path in markets like Turkey, Tunisia, and Egypt. Egypt’s next MPC is October 2. Turkey’s next is September 11, with the central bank’s own year-end median aiming at a 35% rate, leaving one more cut before December still on the table.

A Fed hike would come at a moment when regional financing is already tightening. In Saudi Arabia, Al Rajhi, SNB, and Riyad Bank have all lowered 2026 loan-growth guidance in the past month as deposits are outpacing lending for a second straight quarter. An interest rate hike would further reduce demand for loans. And in venture and equities, the financing pain is already visible. International capital deployed to MENA startups fell 65% y-o-y in 1H 2026, with MENA-based investors now supplying 81% of regional funding (up from 58%). A US risk-free rate step-up shifts allocators’ math further against emerging-market equities and ventures at exactly the moment the region’s own capital is stretched to plug the international pullback.

A hike would also push the easing path in markets like Egypt further out. The CBE’s own base case is 16.6% inflation in FY 2026/27 with a return to the 7% ±2 target range in 2H 2027. That path was built on a benign external backdrop, but a Fed hike does two things simultaneously: it supports the USD, which the CBE has flagged as its single biggest inflation transmission channel, with about a 0.18 percentage point increase in headline inflation per 1% EGP depreciation, and it widens the differential Egypt needs to maintain to keep the USD 9.5 bn in portfolio outflows from worsening.