Banking expert Tarek Metwally anticipates the Central Bank of Egypt (CBE) to cut interest rates by 200 basis points (equivalent to two percent), despite rising fuel prices and the potential for the return of inflation.
The Central Bank’s Monetary Policy Committee will hold its meeting on Thursday – its second meeting regarding interest rates in 2025.
Metwally noted that this meeting comes amid accelerating economic challenges, making the decision to hold or cut rates debatable, each with its own justification.
During a telephone interview with TV host Lamis al-Hadidi on the“Last Word” (Kalema Akhera) TV show, Metwally explained that there are several reasons supporting the move to cut interest rates.
Among these reasons is the positive gap between inflation and interest rates.
“The inflation rate is currently at 13 percent, while the interest rate is 27.5 percent. Even if inflation rises to 15 to 17 percent following the increase in fuel prices, there remains a large positive margin (seven to eight percent) that allows for a reduction without a significant impact on inflation targeting,” he explained.
He noted that that the second reason is stagnation in local markets, noting that Egyptian markets are suffering from a clear recession.
Metwally explained that the third reason for the reduction is the rising burden of public debt servicing, as: “The general budget bears an increasing burden due to public debt, which doubles by approximately 100 percent every 3.5 years. This calls for stimulating economic growth and reducing the cost of government borrowing by lowering interest rates.”
He concluded by saying that a “200 basis point interest rate cut will not negatively impact inflation targeting and will give the government and the private sector room to maneuver amid economic pressures.”
