Egypt’s central bank is expected to keep interest rates on hold when its Monetary Policy Committee meets on Thursday. This marks a third straight meeting without a change as policymakers balance easing inflation against persistent geopolitical uncertainty.

Economists expect the Central Bank of Egypt (CBE) to leave rates unchanged for a third consecutive meeting. A Reuters survey of 13 economists found unanimous expectations that the CBE will maintain its overnight deposit rate at 19%. Additionally, they expect it to maintain its overnight lending rate at 20%. If these expectations come to fruition, it will extend the pause following its April and May meetings.

Why You Should Care

The Central Bank of Egypt’s interest rate decision will offer an important signal on how policymakers view the country’s inflation outlook and broader economic conditions. While inflation has continued to moderate in recent months, the central bank appears inclined to wait for greater certainty before resuming its easing cycle.

A decision to keep rates unchanged would also shift attention to other monetary policy tools. This includes a possible reduction in banks’ reserve requirements, which could help improve liquidity without altering benchmark borrowing costs.

Another pause in interest rates would signal that the Central Bank of Egypt remains focused on ensuring inflation continues to ease before considering further monetary easing. Markets will also be watching for any measures aimed at improving banking sector liquidity, including potential changes to reserve requirements.

The Details

In its May 21st meeting, the CBE left its key interest rates unchanged after making the same decision at its April 2 meeting.

Mohamed Abu Basha, a leading economist at EFG Holding, indicated that the extension of the ceasefire agreement between the United States and Iran has significantly reduced the likelihood of inflationary pressures. Lower oil prices additionally supported this in recent weeks, and the appreciation of the Egyptian pound.

Beyond the interest rate decision itself, Mahmoud El Masry of the National Bank of Kuwait and Hany Genena of Al Ahly Pharos said the central bank could lower the mandatory reserve requirement to between 12% and 14% to address liquidity shortages in the market.

In February, the CBE reduced the reserve requirement for commercial banks from 18% to 16%. The reserve ratio determines the amount of funds banks must hold rather than lend.

The Ripple

A decision to keep interest rates unchanged would provide continuity for businesses, banks, and investors that have been adjusting to Egypt’s monetary easing cycle. While borrowing costs would remain at current levels, attention could shift to other policy measures, particularly a potential reduction in banks’ reserve requirements.

What to Watch

Markets will be focused not only on Thursday’s interest rate decision but also on the central bank’s policy statement for any updates on its assessment of inflation and liquidity conditions.

 The market will also be watching whether policymakers announce changes to banks’ reserve requirements, a move that some economists believe could help ease liquidity constraints without affecting benchmark interest rates.