Egypt needs to be careful while lowering interest rates
The state announced its first interest-rate cut in almost five years last month, after annual consumer-price growth declined to 13.6%, less than half its September 2023 record.
Trump's moves led to some cuts in forecasts. However, many economists still expect Egypt to make a combined 600 to 800 basis points of cuts throughout 2025.
Jihad Azour, IMF director for the Middle East, North Africa and Central Asia, highlighted that further reductions should be carefully judged.
Azour stated: 'With the current shocks, we see a risk of a resumption of inflation and therefore it's very important to maintain the right policy in order to bring inflation down' to a stable, single-digit level.
Egyptian President Abdel-Fattah El-Sisi's government and monetary officials allowed the pound to plunge nearly 40% more than a year ago and hiked fuel, electricity and other items to secure foreign funding and end an economic crisis.
Azour's comments were echoed by Mohamed Maait, who served as Egypt's finance minister until last year.
When he was asked if Egypt's monetary policy was still too tight, Maait noted: 'Given the current global and regional situation, you have to be very cautious.'
He added: 'You have to make sure that when you take steps, you are 100% sure that this is the right thing to do, according to data, analysis and information. You cannot take a decision and reverse it later.'
The Central Bank of Egypt (CBE) hiked interest rates to a record on the same day it enacted a currency devaluation in March 2024.
The benchmark rate remained untouched until last month, when a 225 basis-point cut reduced it to 25%.
It expects inflation to keep declining in 2025 and 2026, though at a slower pace than in the first quarter (Q1) of 2025.
Upside risks include 'the impact of the current China-US trade war, and an escalation of regional geopolitical conflicts.'
Source: Mubasher
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