Attention is turning to Thursday's meeting of the CBE’s MPC with a broad consensus among economists and market analysts that policymakers will leave interest rates unchanged as they weigh slowing inflation against persistent domestic and external risks.
Annual headline inflation eased to 13 percent nationwide in May 2026 from 13.4 percent in April, while core inflation remained unchanged at 13.8 percent. Although inflation continues to trend lower, it remains well above the CBE's target range, prompting economists to expect the central bank to maintain its cautious stance before restarting its monetary easing cycle.
HC Securities and Investment expected the MPC to leave rates unchanged at Thursday's meeting, citing continued geopolitical uncertainty as well as the need to preserve the attractiveness of Egypt's local debt market and maintain exchange rate stability despite improving macroeconomic indicators.
Heba Mounir, macroeconomic analyst at HC, said the Egyptian economy has shown resilience in absorbing the impact of regional tensions, supported by stronger external sector indicators.
She noted that net international reserves have risen by about $1.68 billion since the beginning of the year to $53.1 billion at the end of May.
Egypt also recorded net foreign inflows of $4.55 billion during the first half of 2026, compared with $1.34 billion during the same period last year. The Egyptian pound appreciated by around 11 percent against the US dollar from its early-April level to around EGP 49.1 per dollar.
Dollar liquidity has also improved significantly, she said, driven by a 38 percent year-on-year increase in remittances from Egyptians working abroad to $17 billion during the first four months of the year, alongside a 27 percent rise in Suez Canal revenues to $1.56 billion over the same period.
Mounir expected inflation to remain broadly stable in the coming months after slowing to 14.6 percent year-on-year and 1.6 percent month-on-month in May, compared with peaks of 15.2 percent annually and 3.2 percent monthly in March, suggesting that inflationary pressures persist, albeit at a slower pace.
She added that the yield on the latest 12-month treasury bill auction reached 24.7 percent, providing a positive real interest rate of around 6.78 percent based on HC's forecast of roughly 14 percent inflation over the next 12 months. Preserving that positive real return, together with geopolitical risks, fiscal deficit reduction targets, and the need to sustain foreign investment in Egypt's debt market, all support leaving rates unchanged, she said.
Easing bias remains, but timing is key
Amr El-Alfy, head of equity strategies, also expects the MPC to keep rates unchanged, saying inflation appears relatively stable amid declining global oil prices and improving geopolitical conditions across the region.
He said the CBE's overall policy direction remains tilted toward monetary easing and lower interest rates. However, the continued periodic repricing of fuel products warrants caution until the economic outlook becomes clearer, making a rate hold the more likely outcome at this stage.
Mostafa Shafie, head of research at Ostoul Capital, shared the same view, arguing that persistent inflationary pressures resulting from periodic increases in administratively regulated goods and services justify a cautious approach before resuming monetary easing.
He added that merchants and manufacturers are simultaneously facing pressure to lower prices following the decline in the dollar to around EGP 49, while consumers continue postponing purchases in anticipation of further price declines. Continued restrictions on non-bank financing also remain in place.
Shafie expected lower global oil prices and exchange-rate stability to support a continued decline in inflation over the coming months. He forecasted that the Central Bank of Egypt would begin gradually cutting interest rates by between one and two percentage points before the end of the year.
He also expected the CBE to reduce banks' reserve requirement ratio from 16 percent to between 12 and 13 percent to ease liquidity pressures within the banking sector.
On competition among banks, Shafie said lenders are increasingly raising returns on deposits and savings certificates to preserve their deposit base amid growing competition from alternative investment vehicles, particularly equities, investment funds, and gold.
Banks recognize that losing deposits would pose a significant challenge to their liquidity positions and are therefore offering attractive returns to retain existing customers and attract new savings as investment opportunities continue to expand, he said.
Fed decision limits room for policy easing
Banking expert Hany Abou El-Fotouh also expects the CBE to leave interest rates unchanged at its 9 July MPC meeting, assigning a roughly 75 percent probability to a hold. He told Ahram Online that preserving price and exchange rate stability remains the priority despite improved foreign currency liquidity.
While lower inflation is encouraging, he said monetary policy depends not only on inflation's direction but also on its proximity to the CBE's 7 percent (±2 percent) target. With core inflation still at 13.8 percent, about 6.8 percentage points above target, the central bank has reason to remain cautious before resuming rate cuts.
Abou El-Fotouh said stronger foreign currency inflows, supported by international reserves of $53.13 billion and higher remittances and tourism revenues, have stabilized the exchange rate, although these gains have yet to become structurally sustainable as net foreign assets remain sensitive and foreign direct investment is still below levels needed to support growth and ease supply-side inflation.
He added that the US Federal Reserve's decision to keep rates unchanged further limits the CBE's room for manoeuvre, as high US interest rates make any rapid domestic rate cut more sensitive to capital flows and exchange rate movements.
While assigning a 25 percent probability to a limited rate cut if inflation continues to ease and the pound remains stable, he said keeping interest rates unchanged remains the least risky option. He warned that cutting rates too early could weaken the pound and fuel imported inflation, while keeping rates elevated for too long would increase borrowing costs for businesses and raise the government's debt-servicing costs.
Banks seek to retain deposits as alternatives grow
Capital markets expert Hanan Ramsis also expected the MPC to keep rates unchanged, describing a hold as the most balanced option under current economic conditions.
She argued that raising interest rates would increase government borrowing costs, expand debt servicing obligations, and place additional pressure on the budget deficit, while further tightening monetary policy would weigh on investment and economic activity and impose additional fiscal burdens.
Ramsis warned that cutting interest rates now could prompt savers to shift deposits to higher-yielding alternatives, such as gold, equities, and investment funds, noting that households remain the banking sector's main source of deposits.
She added that banks have recently raised returns on selected deposits and savings certificates, including platinum certificates, which offer yields of around 19.75 percent, to retain customers and prevent liquidity from shifting to other investment channels.
She also cited the CBE's May MPC statement, which attributed its decision to hold rates to persistent geopolitical uncertainty and the need to ensure inflation continues to decline sustainably before resuming monetary easing.
Ramsis expects the CBE to begin gradually lowering interest rates in 2027, provided inflationary pressures continue to ease, and domestic and global economic conditions remain stable.
Temporary inflation pressures favour a wait-and-see approach
Ahmed Abdel Nabi, head of research at Mubasher Financial Brokerage, also expects the MPC to leave interest rates unchanged, arguing that temporary price pressures, particularly from adjustments to administered prices, warrant a cautious approach.
While inflation has eased in recent months, he said the CBE needs to ensure the decline is sustainable amid ongoing external uncertainty and geopolitical tensions that could affect markets and foreign currency inflows.
Holding rates steady would give the central bank time to assess recent economic developments, monitor inflation and exchange rate trends, and preserve price stability and the attractiveness of local debt instruments before resuming monetary easing.
He concluded that a rate hold remains the most likely outcome until inflation and broader economic conditions become clearer.
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