The Central Bank of Egypt (CBE) is expected to keep its benchmark interest rate unchanged at 27.25% in its seventh consecutive meeting scheduled for Thursday as policymakers looks to navigate a complex economic landscape.
A Bloomberg survey of eight economists found that all but one expect the Central Bank of Egypt to hold rates steady as authorities weigh the impact of slowing inflation, global trade disruptions and heightened investor uncertainty.
The lone exception, Morgan Stanley & Co Intl Plc, projects a 200-basis-point cut, but the broader market consensus suggests a cautious stance from monetary policymakers.
Egypt has faced significant economic headwinds with inflation declining only slightly to 24% in January from 24.1% in December—well above expectations.
The slowdown even though marginal shows that price pressures remain elevated and continue to impact the apex bank monetary policy decision.
The central bank has maintained that rates would stay at current levels until inflation shows a “significant and sustained decline.”
Beyond domestic inflationary concerns, external factors are also influencing Egypt’s policy outlook.
Donald Trump’s protectionist trade policies, which have strengthened the U.S. dollar, are weighing on Egypt’s portfolio inflows and complicating what had been a tentative recovery of the Egyptian pound.
“The prospect of American pressure being brought to bear on Egypt has eroded investor sentiment,” said Farouk Soussa, economist for the Middle East and North Africa at Goldman Sachs Group Inc.
At the same time, Trump’s controversial proposal to relocate approximately two million Palestinians from Gaza to neighboring countries has escalated geopolitical uncertainty. The plan, which has been firmly rejected by Egypt and other Arab nations, has raised concerns over potential U.S. aid cuts to Cairo as a means of political leverage.
While direct economic fallout from such a move would be limited—U.S. aid accounts for just 0.1% of Egypt’s GDP—the broader geopolitical implications add another layer of risk.
Arab leaders are set to meet in Saudi Arabia this week to discuss a counterproposal aimed at keeping Palestinians in Gaza as part of a post-war reconstruction effort.
The ongoing conflict has also disrupted shipping through the Suez Canal, a critical revenue source for Egypt. Houthi attacks on Red Sea vessels have cut Suez Canal traffic by at least 60% with a $7 billion revenue shortfall estimated for the current fiscal year.
“All these developments are ‘favoring a wait-and-see approach’ for Egypt’s central bank,” said Samira Kalla, economist for the Middle East and North Africa at Deutsche Bank AG.
Despite external challenges, Egypt is gradually emerging from a prolonged economic crisis.
A $57 billion global bailout, led by the United Arab Emirates was agreed upon in early 2024 to provide the much-needed financial relief.
The package includes an expanded $8 billion International Monetary Fund (IMF) deal with an additional $1.2 billion loan disbursement awaiting board approval.
By its next policy meeting in April, the CBE may have clearer conditions for easing.
Analysts anticipate that two months of inflation below 20%, coupled with the IMF loan tranche, could create an environment more conducive to rate cuts.
“Making conditions more conducive” to an easing cycle remains the central bank’s priority, said Carla Slim, an economist at Standard Chartered Plc.
Egypt last cut interest rates in 2020, at the height of the COVID-19 pandemic. Since then, rates have surged, particularly following a 40% devaluation of the pound in March 2024. With inflation still well above target and external pressures mounting, policymakers are expected to keep rates elevated—at least for now—as they assess the economic trajectory in the months ahead.
