The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) is scheduled to hold its sixth meeting on 2 October to review the country’s key interest rates amid expectations that it will keep rates unchanged.
The MPC bases its decision on the latest economic developments domestically and globally.
Over the past five meetings, the MPC has introduced three cuts to key interest rates to a total of 5.25 per cent, meaning that they now stand at 22 per cent, 23 per cent, and 22.5 per cent for the overnight deposit rate, the overnight lending rate, and the rate of main operations, respectively. The discount rate has also been reduced to 22.5 per cent.
Nashwa Saleh, an associate professor of finance and fintech at the Kingston Business School in London, believes that the CBE will adopt a conservative stance at its next meeting.
Central banks worldwide are shifting towards modest cuts or keeping rates unchanged, she said, creating space for emerging markets like Egypt to cautiously loosen policy.
She believes there should not be more than 1.5 per cent of additional rates cuts before the end of the year to safeguard progress towards the inflation target of seven per cent in the fourth quarter of 2026.
Besides its October meeting, the MPC is also scheduled to meet in November and December this year.
Saleh warned of potential upward triggers for inflation. Energy subsidy reforms, while necessary, could push inflation upwards via higher fuel costs feeding into the consumer price index (CPI) basket, she said.
It could also have an indirect effect via higher transport, food, and services costs. Added to this are ripple effects from global tariff shocks and the newly passed rent law, which will trigger a structural rise in rents that represents 12 per cent of the CPI basket of goods and services, she noted.
“These combined pressures could drive inflation up by four to six per cent,” Saleh said.
Urban headline inflation recorded 12 per cent in August compared with 13.9 per cent in July, down from around 38 per cent in September 2023. Inflation is an important factor in MPC decisions, which target price stability. The CBE began to cut rates in April when inflation started cooling.
Saleh stressed that the CBE must balance the need to control inflation with social and political considerations.
“Rate cuts, while supportive of growth, risk eroding the social safety net,” she noted, adding that nearly 10 per cent of people, mostly elderly, depend on interest earned on bank deposits for their income.
Alongside monetary prudence, she added, structural reforms also remain crucial in empowering the private sector, rationalising public infrastructure spending, and advancing fiscal reforms to reinforce credibility, she told Al-Ahram Weekly.
Saleh said that Egypt’s economic outlook depends on the disciplined consolidation of monetary reforms, the careful sequencing of subsidy removals, and continued structural adjustments.
Success, she said, will hinge on maintaining financial stability while protecting vulnerable groups and ensuring that the reform momentum translates into sustainable, inclusive growth.
Egypt’s New Economic Narrative recently released by the government targets seven per cent real GDP growth by 2030, raising the share of private investments in total investments to 66 per cent, up from 60 per cent in the plan for the current fiscal year 2025-2026, and increasing the contribution of the private sector to GDP to 82 per cent, up from around 77 per cent in 2024-2025.
Banking expert Ahmed Shawky said that the CBE is likely to cut rates at the next MPC meeting.
He said that with the prime minister’s announcement lifting fuel subsidies, except for diesel which will remain subsidised to contain inflation and avoid major increases in transportation and operating costs, Egypt is facing a baseline scenario that is likely to push the committee towards further rate cuts.
Currently, there is a gap of nearly 10 per cent between inflation and interest rates, he told the Weekly, supporting additional cuts in interest rates by between two and four per cent during this year’s remaining three MPC meetings.
Shawky argued that this scenario could change should other factors come into play, such as potential geopolitical disruptions and tensions in the region.
He does not expect the US Federal Reserve’s recent 0.25 per cent rate cut to have a direct impact on Egypt’s MPC decisions, given the lack of direct linkage with the Egyptian economy.
Experts believe nonetheless that the Fed’s rate supports the attractiveness of Egypt’s debt instruments to foreign investors.
According to Shawky, foreign-exchange inflows will continue to support the stability of the pound’s performance, backed by a rise in foreign portfolio investment in debt instruments, as well as an increase in Egypt’s foreign-currency reserves, which were more than $49 billion in August.
In the past, interest rates were raised to encourage people to hold onto their pound savings and discourage them from converting them into hard currency.
Shawky warned, however, that the persistence of the trade deficit in the balance of payments will directly affect the exchange rate. Closing this gap requires bolstering productive sectors to enhance Egyptian exports, which in turn will support GDP growth while also reducing inflation and unemployment rates, he noted.
* A version of this article appears in print in the 25 September, 2025 edition of Al-Ahram Weekly
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