The Central Bank of Egypt (CBE) lowered its key interest rates by one percentage point on Thursday, February 13, bringing the overnight deposit rate to 16.25% and the lending rate to 17.25%. This is the sixth rate cut in ten months, as part of a policy aimed at stimulating economic growth and supporting domestic production.
After aggressive hikes to contain inflation and stabilize the Egyptian pound, the CBE is now taking a more accommodative approach. The rate cut is expected to reduce borrowing costs for businesses and consumers, encourage private investment, and strengthen local production. Additionally, the central bank has lowered the reserve requirements for commercial banks, freeing up more capital for lending.
Analysts believe that these measures will particularly benefit the manufacturing and real estate sectors, small and medium-sized enterprises, as well as consumers.
Despite these benefits, risks remain. A further rate cut could reignite inflation if demand outstrips supply, and the Egyptian pound remains exposed to volatility and capital outflows. The effectiveness of the measure will also depend on how quickly banks pass on the rate cuts to borrowers.
The CBE has indicated that it will continue to closely monitor economic data to adjust its monetary policy as needed.
Read also: Open market: the Central Bank of Egypt withdraws $1.7 billion in liquidity.
