Egypt Cuts Interest Rates by 50 Bps

FILE PHOTO: The headquarters of Central Bank is seen in downtown Cairo, Egypt December 27, 2016. REUTERS/Mohamed Abd El Ghany
FILE PHOTO: The headquarters of Central Bank is seen in downtown Cairo, Egypt December 27, 2016. REUTERS/Mohamed Abd El Ghany
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Egypt Cuts Interest Rates by 50 Bps

FILE PHOTO: The headquarters of Central Bank is seen in downtown Cairo, Egypt December 27, 2016. REUTERS/Mohamed Abd El Ghany
FILE PHOTO: The headquarters of Central Bank is seen in downtown Cairo, Egypt December 27, 2016. REUTERS/Mohamed Abd El Ghany

Egypt’s central bank unexpectedly cut its main overnight interest rates by 50 basis points on Thursday, saying exceptionally low inflation gave it room to help boost the economy.

The bank’s Monetary Policy Committee (MPC) reduced the lending rate to 9.75% and the deposit rate to 8.75%, it said in a statement.

Of 18 analysts polled by Reuters, 15 had expected the bank to keep rates steady, and three had expected it to reduce them by one percentage point.

“The reduction of policy rates in today’s MPC meeting provides appropriate support to economic activity, while remaining consistent with achieving price stability over the medium-term,” the MPC said.

Annual urban consumer price inflation fell to 3.4% in August, the second lowest level in almost 14 years, from 4.2% in July. Inflation had slid to 3.1% last October but rebounded in subsequent months.

Inflation remained well below the central bank’s target range of 6% to 12%, the MPC statement said.

The MPC expected inflation to hover around the lower band of the 6-12% inflation band in the rest of 2020, due in part to adverse base effects from 2019.

Overnight interest rates are at their lowest since early 2016, before Egypt embarked on a three-year, IMF-backed economic reform program. Egyptian one-year treasury bills carried an average yield of 13.6% at an auction on Thursday.

Egypt’s economy grew by a preliminary 3.5% in the year that ended June 30, according to the MPC statement, well below the 5.6% the government had forecast before the coronavirus pandemic began hitting the economy in February.

“The cut shows the central bank is not worried about capital flight in the short term and is comfortable with inflation, which is expected to stabilize at 5.5% towards the end of this year,” said Arqaam Capital’s Noaman Khalid, who had forecast a 100 basis point reduction.

Foreign holdings of Egyptian treasury bills rebounded in July to 172.0 billion Egyptian pounds ($10.9 billion) from 122.44 billion at the end of June, the central bank said on Thursday.

In March, foreign investors sold more than half of their Egyptian pound treasury bill holdings as the coronavirus pandemic led them to pull money out of emerging markets.



4 Factors Behind the Decline of Saudi Stock Market in H1 2025

Two investors monitor the trading screen in the Saudi financial market in Riyadh (AFP) 
Two investors monitor the trading screen in the Saudi financial market in Riyadh (AFP) 
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4 Factors Behind the Decline of Saudi Stock Market in H1 2025

Two investors monitor the trading screen in the Saudi financial market in Riyadh (AFP) 
Two investors monitor the trading screen in the Saudi financial market in Riyadh (AFP) 

Financial analysts and market specialists have identified four main factors driving the decline of the Saudi stock market during the first half of 2025. Speaking to Asharq Al-Awsat, they pointed to heightened geopolitical tensions in the region, ongoing trade disputes and tariffs between the United States, China, and Europe, oil price volatility, and persistently high interest rates. Collectively, these pressures have squeezed liquidity and weighed heavily on market performance.

Despite the downturn, analysts expect the market to gradually recover over the second half of the year, supported by potential global interest rate cuts, stabilizing oil prices, easing economic uncertainty, and forecasts of robust growth in Saudi Arabia’s GDP and the non-oil sector, alongside continued government spending on major projects.

The Saudi stock market recorded notable losses in the first six months of 2025, with the benchmark index retreating 7.25%, shedding 872 points to close at 11,163, compared to 12,036 at the end of 2024. Market capitalization plunged by around $266 billion (SAR 1.07 trillion), bringing the total value of listed shares to SAR 9.1 trillion.

Seventeen sectors posted declines during this period, led by utilities, which plummeted nearly 32%. The energy sector fell 13%, and basic materials dropped 8%. In contrast, telecom stocks advanced around 7%, while the banking sector eked out a marginal 0.05% gain.

Dr. Suleiman Al-Humaid Al-Khalidi, a financial analyst and member of the Saudi Economic Association, described the first-half performance as marked by significant swings. “The index rose to 12,500 points, only to lose nearly 2,000 points before recovering to about 11,260,” he said.

He attributed the volatility to several factors: regional geopolitical strains, oil prices dipping to $56 a barrel, and high interest rates, which constrained liquidity. He noted that financing costs for traders now range between 7.5% and 9%, historically elevated levels.

“The Saudi market posted the steepest decline among regional exchanges despite record banking sector profits, which failed to translate into stronger overall index performance,” he observed.

Looking ahead, Al-Khalidi anticipates three interest rate cuts totaling 0.75 percentage points by next year, which would bring rates down to about 3.75%. “That should encourage a recovery in trading activity, improve liquidity, and support an upward trend in the index toward 12,000 points, potentially reaching 13,500 if momentum builds,” he added.

Meanwhile, Mohamed Hamdy Omar, economic analyst and CEO of G-World, described the downturn as largely expected, citing external pressures and prolonged trade tensions between the US, China, and Europe. “Retaliatory tariffs dampened investor confidence globally, and Saudi Arabia was no exception,” he said.

Lower oil revenues also strained state finances, leading to a budget deficit of SAR 58.7 billion in the first quarter, further tightening liquidity. Trading volumes fell over 30% year-on-year.

Omar pointed out that changes to land tax regulations and heightened regional security risks also weighed on sentiment. Nonetheless, he expects gradual improvement in the second half of 2025, driven by anticipated rate cuts, rebounding oil prices, and continued large-scale public investments.

He stressed the need for vigilance: “Saudi Arabia remains among the most stable markets, thanks to proactive regulation and policies designed to attract foreign capital and bolster investor confidence.”