CAIRO – 21 July 2024: The Central Bank of Egypt (CBE) is expected to implement a series of interest rate reductions in the coming months, according to a report by Goldman Sachs.
The report suggests that in September, the CBE will reduce interest rates by 1 percent, followed by a further decrease of 2 percent in the last quarter of 2024.
Goldman Sachs predicts that these rate cuts will result in a cumulative reduction of approximately 11.25 percent by the end of 2025, bringing the interest rate to 13 percent. This is higher than their previous estimate of 9 percent.
The report also forecasts a decline in inflation of about 12.5 percent throughout 2025, which is lower than the consensus expectations of 16 percent. Furthermore, it anticipates inflation to drop below 10 percent by the end of the year.
Regarding Egypt's exchange rate, the report states that it is not expected to experience any significant instability in the near future.
In light of these projections, the report suggests that interest rates within Egypt's IMF program may also decrease due to inflation trends. It highlights the expectation that inflation will reach 29 percent by the end of this year, while consensus estimates indicate a decline to 23 percent. This indicates a potential opportunity for interest rate reduction.
In July, the CBE's Monetary Policy Committee decided to maintain the current key interest rates, stating that the existing monetary stance is appropriate to support the ongoing moderation of inflation.
The overnight deposit rate, overnight lending rate, and the rate of the main operation remained unchanged at 27.25 percent, 28.25 percent, and 27.75 percent respectively. The discount rate was also held steady at 27.75 percent.
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