HC Securities Expects the Central Bank of Egypt to Keep Interest Rates Unchanged in July Meeting
In light of the latest macroeconomic developments in Egypt and the current geopolitical situation, the Financial Research Department at HC Securities and Investment expects the Central Bank of Egypt (CBE) to keep interest rates unchanged at its upcoming Monetary Policy Committee (MPC) meeting scheduled for Thursday, July 9, 2026.
Heba Monir, Macroeconomist at HC, stated: "The regional geopolitical disruptions resulting from the US-Israeli war against Iran, which began on February 28, continue to impact the global economy and Egypt. However, the stability of Egypt's external position, coupled with exchange rate flexibility, has enabled the economy to absorb the repercussions of this conflict relatively well so far."
This resilience is evident in the Net International Reserves (NIR), which rose by a total of $1.68 billion year-to-date (YTD) to reach $53.1 billion in May. Meanwhile, unofficial foreign currency deposits not included in official reserves increased by a smaller margin of $647 million YTD to reach $11.0 billion; these deposits had previously dropped by $2.90 billion between February and April before recovering in May.
The Net Foreign Assets (NFA) of the Egyptian banking sector saw an acceptable decline of $6.60 billion, dropping to $22.9 billion in April compared to a five-year peak of $29.5 billion in January. The NFA figure rebounded by $1.57 billion month-on-month (MoM) in April, following a total drop of $8.18 billion during February and March, supported by a slowdown in foreign portfolio outflows from treasury bills.
Net Foreign Inflows Egypt recorded net foreign inflows of $4.55 billion during the first half of 2026, compared to just $1.34 billion in the first half of 2025. Concurrently, the Egyptian pound appreciated by approximately 11% against the US dollar, reaching around EGP 49.1 per USD compared to roughly EGP 54.7 in the first week of April. This reflects a YTD depreciation of only about 3%.
Foreign exchange liquidity has improved, with remittances from Egyptian expats surging by 38% year-on-year (YoY) to $17 billion during the first four months of 2026. Suez Canal revenues also increased by 27% YoY to $1.56 billion in the same period.
"On the domestic front, we expect inflation to move somewhat sideways after slowing to 14.6% YoY and 1.6% MoM in May, down from a 14-month peak of 15.2% YoY and 3.2% MoM in March, which was influenced by the war's impact on energy prices and currency depreciation," Monir added.
Given these dynamics, the yield on the latest 12-month treasury bills auction stood at 24.7%, translating to a positive real interest rate of 6.78%. This calculation uses HC's updated 12-month inflation estimate of around 14% and accounts for a 15% tax rate for US and European investors.
Monir concluded: "Accordingly, given the geopolitical risks and their potential impact on Egypt's USD resources, our updated inflation estimates, the need to maintain the attractiveness of foreign capital inflows to the Egyptian debt market, and budget deficit targets, we expect the MPC to keep interest rates unchanged at its July 9 meeting."
Interest Rates Background It is worth noting that the CBE's MPC kept the overnight deposit and lending rates steady at 19.0% and 20.0%, respectively, during its May 21 meeting. This reflects total cuts of 825 basis points (bps) since 2025, following 1,900 bps of total hikes since the tightening cycle began in 2022. The committee also reduced the required reserve ratio (RRR) by 200 bps to 16.0% down from 18.0% in February 2026.
According to CAPMAS data, Egypt's annual inflation slowed to 14.6% in May from 14.9% in April, while MoM inflation rose by 1.6% in May compared to 1.1% in April.
Globally, the US Federal Reserve maintained its target interest rate range at 3.50-3.75% on June 17, reflecting a total cut of 175 bps since September 2024, following 525 bps in hikes since 2022. In contrast, the European Central Bank (ECB) raised its key interest rates by 25 bps, bringing the deposit facility, main refinancing operations, and marginal lending facility rates to 2.25%, 2.40%, and 2.65%, respectively. This represents a net cut of 175 bps since June 2024, following 450 bps of hikes since 2022.