Analysts in a Reuters poll expected the Central Bank of Egypt to cut key interest rates by 100 basis points at Thursday’s meeting, continuing its monetary easing policy in light of the slowdown in inflation rates.
According to the average forecast of 14 economists who participated in the survey, the central bank’s monetary policy committee is expected to reduce the deposit rate to 19% and the lending rate to 20%. It is worth noting that the deposit interest rate currently stands at 20% and the lending interest rate at 21%.
The committee began lowering interest rates last April, after raising the lending rate to 27.25% as part of an $8 billion financial support package with the International Monetary Fund in March 2024, which also included devaluing the Egyptian pound against the dollar.
As a result of this increase, real interest rates in Egypt are among the highest in the world. Since April, the central bank has cut interest rates by 725 basis points.
“Given the improvement in Egypt’s external position, the appreciation of the Egyptian pound, the increase in the real interest rate, the slowdown in input costs, the relative decline in geopolitical risks, and the expected decline in inflation rates, we see the Monetary Policy Committee as having an opportunity to cut interest rates by 150 to 200 basis points,” Heba Mounir of HC Securities & Investment said in a note.
It is noteworthy that the annual inflation rate in Egyptian cities reached 12.3% in December, down from its peak of 38% in September 2023. Inflation data for January is scheduled to be announced tomorrow, Tuesday. (Arabic)
