The economic circles in Egypt are awaiting the meeting of the Monetary Policy Committee of the Central Bank of Egypt scheduled to be held on February 20, 2025, amid wide weightings to stabilize the basic interest rates for the seventh time in a row.
According to a poll conducted by Reuters, which included 10 economists and analysts, the majority expects that the central bank will continue to install interest rates in the absence of tangible improvement in inflation, despite the slight decline in some indicators.
The factors affecting the decision
The main factor that will determine the central bank’s direction is the country’s inflation path. The recent data showed a slight decrease in the annual inflation rate to 23.2% in January 2025 compared to 23.4% in December 2024, while the basic inflation, which excludes food and volatile energy prices, decreased from 23.2% to 22.6%.
Although this decline is slight, it reflects the beginning of a gradual decline in the pressure of inflation, which gives the central bank some space to consider reducing interest if this trend continues. However, inflation is still far from the goal set by the central bank, which is 7% by the end of 2026, making the decision to reduce interest at the present time.
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Expectations of analysts
For analysts’ expectations, reports indicate that many experts tend to install interest, in light of the continued inflation at high levels. BNB Pariba Bank explained that despite the slight decline in inflation, the continuity of this trend may give the bank an opportunity to facilitate monetary policy in the future. On the other hand, HC Securities added that the economic situation, including the decline in the balance of payments and the current account deficit, enhances the need to install interest at the present time to maintain the attractiveness of investment in local debt tools.
Economic pressures and external pressures
In a related framework, the Egyptian economy faces additional pressure from several sides. The Egyptian economy witnessed a decline in the balance of payments, as it turned into a deficit of $ 991 million in the first quarter of the fiscal year 2024-2025, compared to a surplus of $ 229 million in the same period last year. The net assets of the banking sector of foreign currency also decreased by 12% to $ 5.23 billion in December 2024. Geopolitical tensions in the region, especially those related to the Suez Canal, led to increased pressure on foreign exchange flows, which reflects negatively on the Egyptian economy.
Possible scenarios of the decision
- Install interest: The installation remains the most likely option, especially in light of the continued inflation above the target levels. The installation also contributes to enhancing the attractiveness of investment in treasury bills, which supports foreign exchange flows.
- Limited reduction: The central bank may resort to a slight reduction in the interest, within 100 basis points, if inflation indicators continue to decline and some economic indicators improve. This reduction may support productive sectors such as industry and real estate.
- Significant reduction: Some believe that a larger reduction (200 basis points) may be necessary to stimulate growth, especially with the decline in the global borrowing cost. However, this scenario remains less likely due to the risks that may cause it to stabilize the Egyptian pound.
The economic situation sends positive signals
Despite the great pressure facing the Egyptian economy, there are some positive indicators that may support a gradual reduction step in interest. International reserves increased by $ 156 million in January 2025 to $ 47.3 billion. The main purchasing managers index also improved to 50.7 points, exceeding the 50 -point barrier for the first time in a while, which reflects an improvement in non -oil economic activity.
Also read: Egypt: The rise in foreign exchange reserves to 47.265 billion dollars, amid an improvement in hard currency flows
2025-02-17 18:55:00