The Central Bank of Egypt is widely expected to maintain interest rates at their record high of 27.25% during today's meeting, aiming to sustain the slowdown in inflation.
If rates are held steady, it would mark the sixth consecutive decision to maintain them, even as inflation has fallen to 25.5%, its lowest level in nearly two years.
Most economists predict that Egypt will keep interest rates unchanged until at least the end of the first quarter of 2025.
Meanwhile, the National Bank of Kuwait (NBK), in a recent report, suggested that Egypt's Monetary Policy Committee might opt for a rate cut of 2–3% during today's meeting.
The report highlighted that a reduction in interest rates would provide critical support for lending and private-sector activity. It added that delaying rate cuts would create a more compressed timeline for reductions in 2025, signaling a stronger stance against inflation but offering less support for economic growth.
The NBK report further forecast that the Central Bank of Egypt might reduce interest rates by as much as 10% in 2025, based on expectations of declining inflation.
The report stated: "We expect average inflation to be around 13% for the remainder of 2025. In our view, this provides room for the central bank to lower interest rates by at least 8–10% in 2025, followed by further reductions in 2026. Based on our inflation projections, a 10% rate cut by the end of 2025 would still leave real interest rates in positive territory, around 3% by the end of that year, and potentially exceeding 6% if inflation weakens further."
Naaman Khaled, an economic analyst at NBK's Economic Research Department, commented that since the central bank has kept interest rates steady since March, when the currency was last devalued, it has created an environment of prolonged high rates. He pointed out that by February next year, due to base effects, inflation could fall below 15%, raising the question of why the central bank should wait to cut rates. Khaled noted that today's meeting could serve as a signal from the central bank that the coming year will be better.
He added that even with inflation expected to drop to 13%, it remains a high level.
