Bloomberg: Egypt’s First Interest Rate Cut Since 2020 May Be Limited by Trump’s Tariff Risks - عرب فايف

Bloomberg reported that Egypt is preparing for its first interest rate cut in nearly five years, but the move is likely to be modest due to growing global uncertainty caused by U.S. President Donald Trump’s evolving trade policies.

Expert Expectations

According to a Bloomberg survey, five out of eight economists expect the Central Bank of Egypt (CBE) to initiate a monetary easing cycle during its upcoming meeting on Thursday. The remaining experts predict that the overnight deposit rate will remain unchanged at 27.25%, where it has stood since the pre-float hike in March 2024.

Forecasts for the potential rate cut range from 75 to 225 basis points, reflecting the impact of Trump’s tariff threats on monetary policy decisions.

Economic Backdrop

Annual inflation in Egypt fell to 13.6% in March 2025.Egypt’s real interest rate stands at around 15%, one of the highest globally.This gives the central bank room to cut rates, though investor sentiment remains sensitive to exchange rate volatility and global capital flows.

Market Insights

Simon Williams, Chief Economist for Central & Eastern Europe, Middle East, and Africa at HSBC, said: “Global market volatility will be a key factor. But I see no justification for keeping real interest rates this high, especially with weak growth. It will be a tough decision, but I think they will cut rates.”

Bloomberg noted that maintaining attractive yields on local-currency debt is crucial for Egypt to retain foreign investments, particularly as the Egyptian pound saw its steepest decline in nearly a year last week.

Domestic Developments

Despite external pressures, domestic indicators support a cautious rate cut:

A 13.6% average fuel subsidy cut was introduced last week under an IMF-backed reform plan.Global oil prices have sharply declined.The government aims to stimulate private sector activity and consumption-driven growth.

Mohamed Abu Basha, Head of Research at EFG Hermes, said that inflationary pressures have remained moderate in 2025, and the recent fuel price hike is unlikely to significantly shift inflation expectations. He added that Egypt has “ample room to begin a rate-cutting cycle without jeopardizing monetary stability.”

Outlook for 2025

Abu Dhabi Commercial Bank expects the CBE to reduce interest rates by up to 800 basis points gradually throughout the year. This would help reduce Egypt’s heavy debt burden and support economic recovery through increased household consumption and private sector expansion.