The previous MPC meeting ended with rates held at 24 percent for deposits and 25 percent for lending.
The market awaits the MPC decision, which is determined in light of global and local macroeconomic developments, primarily focusing on inflation rate trends.
Aya Zohairy, the deputy head of Macroeconomic Research at Zilla Capital, told Ahram Online that the decision to hold rates, taken in the last meeting in May, was shaped by a complex mix of domestic and international factors.
These include persistent high inflation levels, relative stability in the Egyptian pound’s exchange rate, and Egypt’s need to maintain short-term foreign inflows, also known as “hot money.”
Inflation: The most sensitive indicator
According to Zohairy, both core and headline inflation remain above the CBE’s official targets, despite some recent declines.
She warned that any further rate cuts under current inflationary pressures could undermine efforts to curb price growth, especially amid continued global food price volatility and geopolitical tensions in the Middle East that threaten supply chains.
“The CBE is operating with extreme caution. Inflation remains above safe levels, and external risks add another layer of complexity,” she noted.
Egypt’s annual inflation rate eased to 14.4 percent in June, down from 16.5 percent in May, according to data released by the Central Agency for Public Mobilization and Statistics (CAPMAS).
On a monthly basis, the Consumer Price Index (CPI) dipped by 0.1 percent, reaching 258.1 points, its first slight decline in recent months.
The decline was largely driven by a noticeable drop in food prices, particularly meat and poultry, which fell by 3.8 percent, and vegetables, which went down by one percent.
This outweighed monthly price increases in other essential food categories such as fish and seafood (increased by 1.1 percent), grains and bread (by 0.3 percent), and fruits (by 0.5 percent).
Despite the overall monthly decrease, several sectors saw price increases. Housing, utilities, and fuels rose by 1.2 percent, driven by a 2.2 percent jump in electricity and fuel costs.
Clothing and footwear increased by 0.7 percent, while healthcare and transportation both saw modest gains.
On an annual basis, prices in several key sectors remain significantly higher. Fruit prices surged by 68.7 percent year-on-year, electricity and fuel costs climbed by 43.6 percent, healthcare rose by 37.6 percent, and transportation jumped 36.2 percent.
Hotel services and personal belongings also posted notable increases of 23.4 percent and 30.9 percent, respectively.
In contrast, meat and poultry prices were among the fewest to decline annually, falling 2.1 percent.
Currency stability offers some relief
After months of volatility, the Egyptian pound has shown signs of stabilization against the US dollar in the official market, buoyed by strong external financing and agreements with regional partners.
However, Zohairy pointed out that this stability does not necessarily grant the CBE full flexibility for further rate cuts.
The CBE had already eased monetary conditions in the first quarter (Q1) of 2025 with a total of 1.25 percent (325 basis points) in cuts over two consecutive meetings.
This came after inflation appeared to be contained, but it rose again over the last three months. The headline urban inflation reached 16.8 percent in May, up from 13.9 percent in April, while the core inflation accelerated to 13.1 percent, up from 10.4 percent.
Banking expert Mohamed Abdel-Aal told Ahram Online that any easing in July will hinge on the June inflation data, which is expected to show a marginal improvement.
He forecasted that urban inflation may edge down to around 16.2 percent, citing the absence of new price pressures.
Abdel-Aal remains optimistic, expecting continued improvement in key macro indicators such as economic growth and falling unemployment.
He added that the ceasefire between Iran and Israel, as well as the easing of global trade tensions, is helping to moderate inflation.
He projected that urban inflation could average around 14 percent in the second half of 2025.
Signs point to continued easing
Abdel-Aal noted that several key indicators support further rate cuts, including easing inflationary pressures, reduced geopolitical risks, currency stability, improved macroeconomic fundamentals, and a broader global trend toward monetary easing, particularly among major central banks.
“All of these factors create a favorable environment for Egypt’s continued transition toward local monetary easing,” he said.
Furthermore, he expected the CBE to pivot decisively, potentially slashing interest rates by 100-175 basis points at its 10 July meeting.
“Such a move would aim to boost market confidence, lower borrowing costs, attract both local and foreign investment, and reduce public debt and budget deficits,” he added.
A rate cut would support Egypt’s productive sectors, encourage SME borrowing, and alleviate debt-servicing costs for the government.
However, it could also slightly reduce the attractiveness of local debt instruments amid a global environment favouring countries with deeper rate cuts, Abdel-Aal concluded.
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