Egypt: Standard Chartered notes inflation recovery slows easing

Central Bank of Egypt Expected to Maintain Rates Amid Economic Pressures

According to Bader Al Sarraf from Standard Chartered, the Central Bank of Egypt is now projected to keep its policy interest rates steady at 19% until the end of the 2026 fiscal year, delaying any anticipated rate cuts. The bank continues to predict a reduction to a 13% policy rate by late 2026, provided that economic conditions become more stable.

Several factors are contributing to tighter financial conditions, including accelerating inflation, increased fuel costs, and capital outflows. Despite these challenges, improvements in foreign exchange liquidity and a rise in net foreign assets are expected to help steady the currency market.

Prolonged Pause in Monetary Policy

Standard Chartered has revised its outlook, now anticipating that the Central Bank of Egypt will maintain its 19% policy rate through the end of the fiscal year in June, rather than implementing rate cuts in the near future.

The forecast for a 13% policy rate by the end of 2026 remains unchanged, suggesting that any monetary easing is likely to be postponed until the latter half of the calendar year, assuming the economic environment improves.

Inflation and Currency Pressures

Recent increases in fuel prices are expected to drive up transportation and production expenses, which could lead to further inflationary surprises in the coming months.

These developments have intensified downward pressure on the Egyptian pound, with the USD/EGP exchange rate recently nearing historic lows around 53 in official markets. This situation underscores the need for a cautious approach to monetary policy.

Nonetheless, enhanced foreign exchange conditions and the ability to absorb capital outflows are likely to support the currency and reinforce expectations that the easing cycle may resume later in 2026.

(This report was produced with assistance from an AI tool and subsequently reviewed by an editor.)