The central bank of Egypt is anticipated to lower rates by 175 bps

As inflation stays low, Egypt’s central bank is anticipated to cut overnight interest rates by a median of 175 basis points on Thursday, continuing a cut that started in April, according to a Reuters poll.

16 analysts predicted that the central bank would lower the loan rate to 24.25% and the deposit rate to 23.25%.

Last month, as part of a financial reform package worth $8 billion from the International Monetary Fund, the central bank cut interest rates by 225 basis points (bps), its first change since March 6, 2024, when it raised rates by 600 bps and allowed the currency to fall precipitously against the dollar.

HSBC’s Simon Williams forecasted a 200 basis point cut, saying, “There are a lot of moving parts, but I don’t see anything that suggests real rates need to stay so high.” “To not cut now would be a missed opportunity.”

After peaking at 38% in September 2023, inflation has been trending lower, and Egypt’s central bank has been attempting to lower it. April’s annual headline inflation rate was 13.9%, a little increase over March’s 13.6%.

In an April meeting of its monetary policy committee, the central bank stated that future rate decreases were now possible due to decreasing inflation.

“Despite the pick up in inflation through March and April, Egypt’s real interest rate is still firmly positive and leaves plenty of scope for policymakers to deliver a 200 bp reduction,” noted James Swanston of Capital Economics.

According to authorities and bankers, since signing its agreement with the IMF last year, the central bank has been reducing the amount of money in circulation. After hitting a record 33.9% growth at the end of February, M2 growth dropped to an annual 25.8% by the end of March.