Egypt Daily News – It appears that Egypt is poised to maintain its current interest rates, holding steady at a historic high of 27.25%, due to recent inflationary pressures and regional geopolitical tensions.
Following significant increases in energy prices, institutions such as Goldman Sachs have adjusted their forecasts, indicating that any anticipated interest rate cuts will likely be postponed until at least 2025.
The backdrop to this decision includes heightened concerns regarding potential escalations in conflict between Israel and Iran, which could impact energy costs further and exacerbate the already strained regional trade environment, particularly following recent attacks on shipping in the Red Sea.
As Egypt navigates these challenges, it is important to remember that the country recently emerged from a two-year economic crisis, aided by a substantial $57 billion global bailout and a significant devaluation of its currency earlier this year.
Economic experts, including those at Standard Chartered, believe that delaying any interest rate reductions may help stabilize the currency amid ongoing uncertainties.
Egypt has raised interest rates by a total of 8 percentage points since the beginning of 2023, yet inflation has continued to thrive, moving to 26.4% in September from 25.7% in July, driven largely by price hikes in fuel, medicine, tobacco, and energy.
While there is hope for a decrease in inflation rates by early next year, the Central Bank of Egypt has made it clear that any shifts in monetary policy will hinge on achieving a “significant and sustained reduction in the inflation rate.”
Current expectations, including insights from economists at firms like EFG Hermes, suggest that inflation will likely remain elevated until early 2024, followed by a potential decline.
In summary, with the current economic climate heavily influenced by both domestic fiscal changes and external geopolitical conditions, Egypt seems intent on maintaining its interest rates for the foreseeable future as it works to stabilize its economy.
