HC expects the CBE to maintain policy rates at its upcoming meeting

Cairo, Egypt, 28 september 2025:

Heba Monir, financial and macroeconomics analyst at HC, commented:
We expect the Monetary Policy Committee (MPC) to maintain policy rates at its upcoming 2 October meeting. This will give the economy time to fully absorb the 200-basis-point rate cut from 28 August. Additionally, the expected inflationary impact from the USD1.00/mmbtu rise in industrial natural gas prices, as well as upcoming increases in gasoline and diesel prices in October, supports this decision.

Improvements in Egypt’s FX liquidity

Regarding Egypt’s external position, FX liquidity showed significant improvement:

• Egyptian banks’ net foreign assets (NFA) rose about 24% month-on-month and 3.54x year-to-date, reaching USD18.5bn in July.

• Worker remittances increased about 6% month-on-month and 19% year-to-date, totaling USD3.8bn, reflecting strong confidence in Egypt’s FX liquidity.

• The Egyptian pound appreciated about 5% year-to-date, reaching EGP48.2/USD.

• Egypt’s 1-year CDS declined to 284 bps from 379 bps at the start of the year.

• Net International Reserves remained stable month-on-month, with a 5% year-to-date increase to USD49.3bn in August.

Attractiveness of Egypt’s carry trade

The latest 12-month T-bills auction yielded 25.74%, implying a positive real interest rate of 8.15% using our 12-month inflation estimate of 13.7% (after a 15% tax for European and US investors). This indicates that Egypt’s carry trade remains attractive.

Meanwhile, the Fed’s recent rate cuts and the decline in Egypt’s CDS would likely reduce the yield required by foreign investors. However, this change is not yet reflected in the most recent T-bill auctions.

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