Deutsche Bank Expects CBE to Cut Rates to 20% by Year-End as Egypt’s Economic Recovery Gains Momentum
The Central Bank of Egypt (CBE) is expected to cumulatively cut rates by 725 basis points (bps) amid a careful unwinding in 2025, according to Deutsche Bank.
In its May meeting, the central bank opted for another rate cut, coming in line with the lender's expectation of 100 bps.
Therefore, the policy rate was lowered to 24%, marking the second consecutive cut this year, leading to a cumulative easing of 325 bps.
The remaining 400 bps is likely to be distributed in equal parts (i.e., 200 bps) over the third and fourth quarters, Samira Kalla, Economist, Deutsche Bank, wrote in a report.
"Overall, this would take the policy rate to 20% by year-end," she said.
Meanwhile, economic activity posted a strong recovery of 4.3% in Q2 of the fiscal year (FY) 2025, compared to 2.3% a year ago and 3.5% in Q1 2025.
Economic activity is forecast to recover further to 3.9% in FY 2024/25, driven by a gradual recovery in domestic demand and a pick-up in private investments, Kalla said.
However, the growth is predicted to remain below its long-term average due to continued challenges, including weaker manufacturing, disruptions in the Red Sea, and fiscal consolidation.
On the other hand, FY 2025/26 is expected to witness stronger growth momentum, following a boost in domestic demand, as inflation and financial conditions are anticipated to see a significant easing.
Further progress on the divestment of state assets should support private-sector activity as well, Kalla said, adding growth is expected to reach 4.5% in 2026.
