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Egypt's Central Bank Expected to Raise Interest Rates by 100 Basis Points

A Reuters poll forecasted that the central bank will raise its overnight deposit rate by 100 basis points (bps) as it tries to dampen resurgent inflation. (Reuters)
A Reuters poll forecasted that the central bank will raise its overnight deposit rate by 100 basis points (bps) as it tries to dampen resurgent inflation. (Reuters)
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Egypt's Central Bank Expected to Raise Interest Rates by 100 Basis Points

A Reuters poll forecasted that the central bank will raise its overnight deposit rate by 100 basis points (bps) as it tries to dampen resurgent inflation. (Reuters)
A Reuters poll forecasted that the central bank will raise its overnight deposit rate by 100 basis points (bps) as it tries to dampen resurgent inflation. (Reuters)

Experts and economists agreed that the Central Bank of Egypt (CBE) will raise interest rates during its meeting on Thursday but did not agree on the rate hike.

A Reuters poll forecasted that the central bank will raise its overnight deposit rate by 100 basis points (bps) as it tries to dampen resurgent inflation.

The median forecast in a poll of 15 analysts is for the bank to raise its deposit rate to 12.25% and its lending rate to 13.25% at its regular monetary policy committee meeting.

The committee will meet a day after a meeting of the Federal Reserve, which is expected to raise US interest rates.

The CBE kept its rates on hold at its last two meetings, on June 23 and August 18, but raised them by 200 bps in May, saying it was seeking to contain inflation expectations after prices surged by their fastest in three years.

“A continued rise in inflation and in parallel Egyptian pound weakness warrant further monetary tightening,” said Mohamed Abu Basha of EFG Hermes.

Cairo’s annual urban consumer inflation quickened to 14.6% year-on-year in August from 13.6% in July, while core inflation rose to 16.7% from 15.6%.

The central bank has an inflation target range of 5-9%, but in June said it would tolerate a higher level until after the fourth quarter.

Not all analysts expect a rate hike.

Wael Ziada of Zilla Holding said most of the economic shock to Egypt has been external and has already been reflected in the domestic inflation rate. Any interest rate increase would have little effect on inflation.

“External variables with regard to oil prices and the food price index may indicate that the worst in terms of importing inflation has passed,” he added.

HC Securities and Investment expected the CBE to gradually raise the overnight deposit and lending rates by 100 bps in the coming meeting and then raise it by another 100 bps in the following meeting.

Financials analyst and economist at HC, Heba Monir commented: “The annual August inflation is the highest recorded since May 2019, as the pricing of imported commodities at a higher exchange rate and supply bottlenecks negatively impacted it.”

At these levels, the annual inflation rate is well above the CBE's pre-announced target of 7% (+/-2% for Q4 2022), and the HC estimates it to average 14.3% until the end of the year.

Regarding Egypt's external position, Monir said the HC believes that pressure is accumulating.

Currently, Egypt offers a real yield on 12-month T-bills of 208 bps (given the current 12-month T-bills rate, HC’s 12-month inflation estimate of 12.25%, and a 15% tax rate for European and US investors) compared to a real return on the US 1-year notes of negative 245 bps (given 1-year notes yield of 3.83%, Bloomberg average 12 million inflation estimate of 6.28%, and assuming no taxes).

Based on HC’s assumptions and calculations, Egyptian 12-month T-bills need to increase in 2022 to 17.3% from 16.9% currently to remain attractive, Monir stressed.

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IMF and Arab Monetary Fund Sign MoU to Enhance Cooperation

The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA
The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA
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IMF and Arab Monetary Fund Sign MoU to Enhance Cooperation

The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA
The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA

The International Monetary Fund (IMF) and the Arab Monetary Fund (AMF) signed a memorandum of understanding (MoU) on the sidelines of the AlUla Conference on Emerging Market Economies (EME) to enhance cooperation between the two institutions.

The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki, SPA reported.

The agreement aims to strengthen coordination in economic and financial policy areas, including surveillance and lending activities, data and analytical exchange, capacity building, and the provision of technical assistance, in support of regional financial and economic stability.

Both sides affirmed that the MoU represents an important step toward deepening their strategic partnership and strengthening the regional financial safety net, serving member countries and enhancing their ability to address economic challenges.

Business

Saudi Chambers Federation Announces First Saudi-Kuwaiti Business Council

File photo of the Saudi flag/AAWSAT
File photo of the Saudi flag/AAWSAT
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Saudi Chambers Federation Announces First Saudi-Kuwaiti Business Council

File photo of the Saudi flag/AAWSAT
File photo of the Saudi flag/AAWSAT

The Federation of Saudi Chambers announced the formation of the first joint Saudi-Kuwaiti Business Council for its inaugural term (1447–1451 AH) and the election of Salman bin Hassan Al-Oqayel as its chairman.

Al-Oqayel said the council’s formation marks a pivotal milestone in economic relations between Saudi Arabia and Kuwait, reflecting a practical approach to enabling the business sectors in both countries to capitalize on promising investment opportunities and strengthen bilateral trade and investment partnerships, SPA reported.

He noted that trade between Saudi Arabia and Kuwait reached approximately SAR9.5 billion by the end of November 2025, including SAR8 billion in Saudi exports and SAR1.5 billion in Kuwaiti imports.

Business

Leading Harvard Trade Economist Says Saudi Arabia Holds Key to Success in Fragmented Global Economy

Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
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Leading Harvard Trade Economist Says Saudi Arabia Holds Key to Success in Fragmented Global Economy

Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).

Harvard University economics professor Pol Antràs said Saudi Arabia represents an exceptional model in the shifting global trade landscape, differing fundamentally from traditional emerging-market frameworks. He also stressed that globalization has not ended but has instead re-formed into what he describes as fragmented integration.

Speaking to Asharq Al-Awsat on the sidelines of the AlUla Conference for Emerging Market Economies, Antràs said Saudi Arabia’s Vision-driven structural reforms position the Kingdom to benefit from the ongoing phase of fragmented integration, adding that the country’s strategic focus on logistics transformation and artificial intelligence constitutes a key engine for sustainable growth that extends beyond the volatility of global crises.

Antràs, the Robert G. Ory Professor of Economics at Harvard University, is one of the leading contemporary theorists of international trade. His research, which reshaped understanding of global value chains, focuses on how firms organize cross-border production and how regulation and technological change influence global trade flows and corporate decision-making.

He said conventional classifications of economies often obscure important structural differences, noting that the term emerging markets groups together countries with widely divergent industrial bases. Economies that depend heavily on manufacturing exports rely critically on market access and trade integration and therefore face stronger competitive pressures from Chinese exports that are increasingly shifting toward alternative markets.

Saudi Arabia, by contrast, exports extensively while facing limited direct competition from China in its primary export commodity, a situation that creates a strategic opportunity. The current environment allows the Kingdom to obtain imports from China at lower cost and access a broader range of goods that previously flowed largely toward the United States market.

Addressing how emerging economies should respond to dumping pressures and rising competition, Antràs said countries should minimize protectionist tendencies and instead position themselves as committed participants in the multilateral trading system, allowing foreign producers to access domestic markets while encouraging domestic firms to expand internationally.

He noted that although Chinese dumping presents concerns for countries with manufacturing sectors that compete directly with Chinese production, the risk is lower for Saudi Arabia because it does not maintain a large manufacturing base that overlaps directly with Chinese exports. Lower-cost imports could benefit Saudi consumers, while targeted policy tools such as credit programs, subsidies, and support for firms seeking to redesign and upgrade business models represent more effective responses than broad protectionist measures.

Globalization has not ended

Antràs said globalization continues but through more complex structures, with trade agreements increasingly negotiated through diverse arrangements rather than relying primarily on multilateral negotiations. Trade deals will continue to be concluded, but they are likely to become more complex, with uncertainty remaining a defining feature of the global trading environment.

Interest rates and artificial intelligence

According to Antràs, high global interest rates, combined with the additional risk premiums faced by emerging markets, are constraining investment, particularly in sectors that require export financing, capital expenditure, and continuous quality upgrading.

However, he noted that elevated interest rates partly reflect expectations of stronger long-term growth driven by artificial intelligence and broader technological transformation.

He also said if those growth expectations materialize, productivity gains could enable small and medium-sized enterprises to forecast demand more accurately and identify previously untapped markets, partially offsetting the negative effects of higher borrowing costs.

Employment concerns and the role of government

The Harvard professor warned that labor markets face a dual challenge stemming from intensified Chinese export competition and accelerating job automation driven by artificial intelligence, developments that could lead to significant disruptions, particularly among younger workers. He said governments must adopt proactive strategies requiring substantial fiscal resources to mitigate near-term labor-market shocks.

According to Antràs, productivity growth remains the central condition for success: if new technologies deliver the anticipated productivity gains, governments will gain the fiscal space needed to compensate affected groups and retrain the workforce, achieving a balance between addressing short-term disruptions and investing in long-term strategic gains.