The decision would follow a 200-basis-point cut on 28 August, the fifth reduction this year.
Heba Monir, financial analyst and economist at HC, said the central bank is expected to allow more time for the economy to absorb the move, especially amid new inflationary pressures.
She cited the government’s recent $1 per million British thermal units (mmbtu) hike in natural gas prices for industry and an anticipated rise in gasoline and diesel prices in October as factors that could fuel higher inflation in the coming months.
Improved FX position
Monir noted that foreign exchange liquidity has strengthened markedly. Egyptian banks’ net foreign assets climbed about 24 percent month-on-month in July, tripling since the start of the year to reach $18.5 billion.
Remittances from Egyptian workers abroad also rose six percent monthly and 19 percent year-to-date, hitting $3.8 billion, a sign, she said, of growing market confidence.
The Egyptian pound has appreciated by nearly five percent this year, trading at 48.2 against the US dollar, while one-year credit default swaps (CDS) fell to 284 basis points from 379 at the start of 2025. Net international reserves were broadly stable in August at $49.3 billion, up five percent since January.
Carry trade appeal
HC said Egypt remains attractive for foreign investors in the carry trade.
The latest 12-month treasury bills auction yielded 25.74 percent, implying a positive real interest rate of about 8.15 percent after factoring in HC’s 12-month inflation forecast of 13.7 percent and a 15 percent tax rate for European and US investors.
Monir added that recent US Federal Reserve cuts and Egypt’s lower CDS levels should ease yield expectations in future treasury auctions, though the impact has yet to be reflected in issuances.
Policy track
The CBE has implemented 525 basis points of cuts across its last five meetings.
The overnight deposit rate stands at 22 percent, the lending rate at 23 percent, and the main operation and discount rates at 22.5 percent.
The 2 October meeting is the MPC’s sixth of 2025, with two more scheduled to take place before the end of the year.
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