Dr. Mohamed Abdel Wahab, economic analyst and financial advisor, expects the Central Bank of Egypt’s Monetary Policy Committee to move toward a major interest rate cut of between 150 and 200 basis points (1.5% to 2%) during its upcoming meeting on Thursday. He described the move as “historic,” aimed at revitalizing the economy, boosting investment, and easing financing burdens on businesses and individuals, amid strong signs of easing inflationary pressures and improving economic performance.
Economic Indicators Supporting a Rate Cut
Abdel Wahab stated that the current environment gives the Central Bank significant room to maneuver, particularly as annual urban inflation fell to 13.9% in July from 14.9% in June, driven by declines in meat, poultry, and vegetable prices. Monthly inflation also dropped by 0.5%, according to data from CAPMAS, while core inflation inched up slightly to 11.6% from 11.4%, still within safe levels that favor monetary easing.
“These figures reflect the success of government policies in stabilizing markets and controlling prices, especially with initiatives that increased supply and reduced the cost of living for citizens,” he added.
Global Outlook Favors Lower Rates
Abdel Wahab noted that the U.S. Federal Reserve’s expected rate cut in September gives the Central Bank of Egypt additional space for an aggressive reduction, while maintaining the attractiveness of Egyptian debt instruments to foreign investors.
He explained that most market surveys predict only a 100 basis point cut at Thursday’s meeting. However, he believes the current landscape supports a much larger reduction, particularly after the sharp rate hikes in March to tighten monetary policy and curb inflation.
Monetary Policy Easing in Egypt
Since April, the Central Bank has been gradually loosening its monetary stance after significantly raising rates in March alongside a currency float and securing an $8 billion IMF financing package. The bank cut rates by 225 basis points in April and another 100 basis points in May, before holding them steady in July.
Impact on Investment and the Stock Market
Abdel Wahab stressed that a significant rate cut would immediately stimulate the local investment climate and attract more foreign direct investment, while reducing borrowing costs for industrial and service companies. This, in turn, would boost growth rates and encourage expansion in production lines.
The move would also invigorate the stock market and increase liquidity, as funds typically shift toward equities when deposit and fixed-income returns decline.
“Lower interest rates will restore balance between borrowing costs and investment returns, reinforcing government efforts to empower the private sector and enhance its contribution to economic growth,” he said.
Future Outlook Supports a Looser Policy
According to Fitch Solutions, the Central Bank is expected to continue its monetary easing path, bringing rates down to 12% by the end of 2025, then to 11.25% in 2026, before stabilizing at historically low levels of around 8.25% between 2028 and 2034.
Abdel Wahab concluded:
“The upcoming Monetary Policy Committee meeting comes amid highly positive economic indicators — declining inflation, stable exchange rates, and ample foreign currency liquidity — making an interest rate cut a strategic move to stimulate the national economy and achieve sustainable growth.”
The Central Bank’s Monetary Policy Committee will hold its fifth meeting of this year 2025, on Thursday to set interest rates. So far, the bank has cut rates by a total of 325 basis points in two moves — 225 basis points in April and 100 basis points in May — marking its first reduction in more than four and a half years. Rates currently stand at 24% for deposits and 25% for lending.
