The Financial Research Department of HCS and Investment expects that the Central Bank of Egypt will keep interest rates unchanged at its next meeting scheduled for Thursday, 9 July 2026, in the light of the latest developments in the Egyptian macroeconomic and geopolitical situation.
Hab Munir, Macroeconomic Analyst of HC: Regional geopolitical disturbances resulting from the American-Israeli war against Iran, which began on 28 February, continued to affect the world economy and Egypt; however, the stability of the external situation of the Egyptian economy with exchange rate flexibility enabled the economy to absorb the consequences of this conflict relatively well so far.
The total net foreign exchange reserve rose by $1.68 billion from the beginning of the year to date to $53.1 billion in May, while non-official reserves deposits increased by a total of $647 million from the beginning of the year to the date to reach $11.0 billion, with these deposits totalling $2.90 billion from February to April, but began recovering during May.
The net assets of the Egyptian banking sector from foreign exchange have declined in an acceptable amount of $6.60 billion to $22.9 billion in April, compared with $29.5 billion in January, which is highest over the past five years. The net foreign assets figure has recovered by only £1.5 billion on a monthly basis in April, reversing by a total of $8.18 billion in February and March, supported by a net outflow of foreign investors.
In addition, foreign currency liquidity has improved, with the remittances of Egyptians working abroad increasing by about 38 per cent on an annual basis to $17 billion during the first four months of 2026, and SwIS revenue increased by about 27 per cent on an annual basis to $1.56 billion in the first four months of 2026. At the local level, inflation is expected to move in a somewhat accidental direction, after slowing to 14.6 per cent on an annual basis and 1.6 per cent. Accordingly, given the geopolitical risks and implications for Egypt ' s dollar resources, our modernization of inflation estimates, as well as the need to maintain the attractiveness of the foreign capital flows to the Egyptian debt instruments market and the targets of budget deficits, we expect that the Monetary Policy Committee will keep interest rates unchanged at its scheduled meeting on 9 July.
It should be noted that, at its meeting on 21 May, the Monetary Policy Committee of the Central Bank of Egypt maintained interest rates for one night of deposit and lending at 19.0% and 20.0% respectively, with a reduction of up to 825 base points since 2025 of the total increase of 1,900 base points since the Egyptian Central Bank began its strict policy in 2022. The Committee also reduced the ratio of the mandatory reserve for banks by 2026 points to 18.0% in February.
Annual inflation in Egypt slowed to 14.6% on an annual basis in May, compared to 14.9% on an annual basis in April, according to the data of the Central Public Mobilization and Statistics Authority, while monthly prices rose by 1.6% on a monthly basis in May, compared to 1.1% on a monthly basis in April.
At the global level, on 17 June, the United States federal maintained its interest rate target at 3.50-3.75%, with a total reduction of 175 basis points since September 2024, having raised interest rates by 525 base points since its tightening policy began in 2022. In contrast, the European Central Bank has increased its main interest rates to facilitate deposit, major refinancing operations, and facilitated marginal lending by 25 per cent on a total basis of 2.2.4 per cent.
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