Egypt held its benchmark interest rates steady, joining a growing list of African economies that have paused monetary easing as escalating Middle East tensions weaken currencies and push up energy costs.
The Central Bank of Egypt left its deposit rate unchanged at 19 percent and lending rate at 20 percent on Friday, marking a pause in its easing cycle after a series of rate cuts since last February. The decision, widely anticipated by analysts, reflects a more cautious policy stance amid rising global uncertainty.
Africa’s second-largest economy now joins Ethiopia, South Africa, Morocco, Angola, and Mozambique in halting rate cuts as renewed inflation risks—driven by higher oil prices and geopolitical instability—cloud the outlook.
The Monetary Policy Committee said it would adopt a “wait-and-see” approach, stressing the need to maintain a tight monetary stance to anchor inflation expectations and contain emerging price pressures. Inflation, which stood at 13.4 percent in February, is expected to rise sharply in the coming months, largely due to surging energy costs.
The macroeconomic environment has deteriorated following weeks of conflict in the Persian Gulf, which has triggered a spike in global oil prices and intensified pressure on Egypt’s currency. The Egyptian pound has weakened to record lows, while billions of dollars in foreign portfolio investments have exited the country’s debt market.
The latest developments pose a fresh test for the Arab’s economic reform programme, launched two years ago under a multilateral bailout that included a 40 percent currency devaluation. While policymakers had begun lowering rates to stimulate private investment and ease borrowing costs, the current pause signals a shift toward preserving macroeconomic stability.
The central bank also trimmed its growth forecast, projecting real GDP expansion of 4.9 percent for the fiscal year ending in June, down slightly from an earlier estimate of 5.1 percent.
Despite cumulative rate cuts of 825 basis points since 2025, Egypt’s interest rates remain among the highest in emerging markets, helping sustain the appeal of its local debt. Before the recent geopolitical shock, foreign investors held an estimated $32 billion in Egyptian treasury bills and bonds, attracted by elevated real yields.
However, rising energy import costs, currency depreciation, and capital outflows are reshaping the outlook. Policymakers are expected to remain cautious in the near term, balancing support for growth with the need to maintain price and currency stability.