Market News

BY Tarek El-Tablawy and Sherif Tarek

(Bloomberg) -- Egypt’s central bank made its fifth interest-rate cut of the year, after a surprise slowdown in inflation gave authorities scope to resume an easing cycle.

The regulator reduced its benchmark deposit rate by 100 basis points to 20% and the lending rate by the same amount to 21%, it said Thursday in a statement on its Facebook page.

Of five economists in a Bloomberg survey, only two predicted the cut. The others expected an extension of November’s rate pause.

The North African nation ratcheted up borrowing costs to a record and devalued its currency by about 40% in early 2024, in steps that helped secure a $57 billion global bailout to turn around the troubled economy.

Authorities have gradually eased rates in 2025, seeking a balance between a figure that’s low enough to trim costly interest payments, yet high enough to attract foreign portfolio investment.

Taming inflation that soared to record 38% in September 2023 has been a key goal. The headline figure slightly slowed to 12.3% in November, despite a recent cut in fuel subsidies that was part of International Monetary Fund-backed reforms.

The bank, in another statement, said that while it expects inflation to continue to ease in 2026, there remains persistent pressure from non-food inflation and global geopolitical tensions.

The Monetary Policy Committee said the latest cut was “consistent with maintaining a monetary stance that anchors inflation expectations and sustains the disinflation path.”

The unexpected inflation reading in November prompted some analysts — including Mohamed Abu Basha, head of macro analysis at Cairo-based investment bank EFG Hermes — to revise their predictions. “Lowering interest rates by 100 basis points would still maintain” the central bank’s “conservative stance,” he said in a note earlier in December.

Egypt and the IMF this week reached a staff-level agreement on two much-awaited reviews of an expanded $8 billion loan program. When approved by the lender’s executive board, Cairo will have access to two tranches worth a combined $2.5 billion.

--With assistance from Abdel Latif Wahba.