However, concerns over potential inflationary pressures, particularly with the looming fuel price hikes in October and the US tariffs that have shaken global markets, pose a challenge to the CBE’s next move.

With inflation slowing down and the annual inflation rate falling below 14 percent, along with a noticeable improvement in the exchange rate of the EGP and a relative calm in food and energy prices, expectations are growing that the Thursday meeting of the CBE’s Monetary Policy Committee (MPC) could see the first significant interest rate cut since May.

The CBE has introduced a total cut of 3.25 percent (325 bps) to the key interest rates since the beginning of 2025.

Is it time for monetary easing?
 

Current economic indicators suggest that the CBE may be in a comfortable position to resume monetary easing.

In March 2024, the CBE made a sharp decision to raise interest rates to 27.25 percent for deposits and 28.25 percent for lending in order to curb inflation.

The current interest rates stand at 24 percent for deposits and 25 percent for lending.

Regarding expectations for the upcoming meeting of the CBE’s MPC, most experts agree that the CBE has enough room to cut rates, though they differ on the potential extent of the cut.

Mohamed Abu Basha, a chief economist at the investment bank EFG Hermes, sees a high likelihood of a rate cut in Thursday's meeting.

Abu Basha told Ahram Online that he expects a one percent (100 bps) rate cut, which aligns with improvements in macroeconomic indicators, the stability of the EGP, and slowing inflation.

The annual inflation rate in Egyptian cities dropped noticeably, reaching 13.9 percent in July compared to 14.9 percent in June, driven by a decline in prices of meat, poultry, fruits, and vegetables, according to the latest data from the Central Agency for Public Mobilization and Statistics (CAPMAS).

On a monthly basis, inflation decreased by 0.5 percent, while core inflation, which excludes volatile items, rose to 11.6 percent in July, compared to 11.4 percent in June.

However, the core inflation accelerated in July.

This relative decline in inflation follows a historical peak of 38 percent in September 2023, after which a gradual downward trend began.

The decline coincided with a marked improvement in the value of the pound against the dollar, supported by government measures to reduce the prices of basic goods and relative stability in energy prices.

A 2% cut can reduce debt burden
 

On the other hand, banking expert Ahmed Shawky said he believes a wide gap exists between current interest rates and inflation rates (around 10 percent), which gives the MPC room to cut rates by at least two percent without compromising its targets.

"A two percent interest rate cut would help reduce the government's debt service costs by about EGP 140 billion, or EGP 70 billion for each percentage point. This would be a direct gain for the state budget, which allocates around 50 percent of its expenditures to debt service,” Shawky explained to Ahram Online.

He noted that a rate cut would help lower financing costs for the productive and commercial sectors, especially with government initiatives to suspend increases in electricity and gas prices, as well as efforts to reduce the prices of basic goods, thereby easing inflationary burdens on both citizens and producers.

"The improvement in the EGP’s position against the dollar, as well as strong dollar inflows, enhances the CBE’s ability to act without fear of a rebound in inflation,” Shawky continued. 

He added that a rate cut in the August meeting would be necessary before October, when a partial fuel price hike is expected, which could push inflation up by one to two percent. Therefore, reducing rates now would be a proactive and wise move.

Real interest rates above 10%: Room for reduction
 

Investment expert Aliaa Gomaa from a major investment bank expects the CBE to resume monetary easing with a rate cut between 1.5 percent and two percent in the Thursday meeting.

"The decline in inflation rates over two consecutive months has raised real interest rates to above 10%, which provides a wide margin for the Central Bank to act,” Gomaa told Ahram Online.

She highlighted several factors supporting a rate cut, including improvements in the balance of payments, supported by rising remittances from Egyptians abroad, a recovery in the tourism sector, increased foreign currency inflows, stability in the foreign exchange market, and an improvement in net foreign assets at banks.

Additionally, the US Federal Reserve is expected to reduce rates in September 2025, which would alleviate pressure on emerging markets and provide room for local policymakers to take action.

High interest rates hinder investment
 

Banking expert Walid Nagy believes that the CBE now has sufficient room to make a rate cut, especially since inflation has stabilized above 13 percent for more than a month, which is relatively acceptable under current conditions.

"The current difference between interest rates and inflation is reasonable and even comfortable for the CBE, making a rate cut decision logical and calculated,” he explained.

He added that all predictions point to a reduction ranging from one percent to three percent, with a maximum possibility of four percent, but he expected it to be no less than one percent.

He also warned against continuing the high-interest rate policy, describing it as "a double-edged sword."

"High interest rates hinder investment, burden the state with debt service costs, and negatively impact consumption and domestic demand," Nagy concluded.