Arab Finance: Barclays expects the Central Bank of Egypt (CBE) to keep interest rates unchanged through the end of 2026, despite June's sharper-than-expected slowdown in inflation, according to a report cited by Al Mal.

The CBE's decision to keep the overnight deposit rate unchanged at 19% for a third consecutive meeting reflects the Monetary Policy Committee's (MPC) adherence to a cautious monetary policy aimed at containing inflationary pressures and preserving price stability.

Barclays highlighted that the MPC is adopting a "wait-and-see" approach while remaining prepared to tighten monetary policy if new domestic or external risks threaten the disinflation path.

The report elaborated that global geopolitical risks, coupled with domestic pressures, continue to drive the CBE to maintain its hawkish stance, even with inflation data showing better-than-expected improvement.

Barclays expects inflation to accelerate temporarily during the third quarter (Q3) of 2026 due to base effects. However, it forecasts the increase will be milder than previously anticipated, with annual inflation reaching around 17.5% in September.

The report suggests that inflation will begin to decline significantly during 2027, returning to the CBE's target range by mid-2027. This would pave the way for a new monetary easing cycle.

Hence, the CBE is expected to cut interest rates by a cumulative 800 basis points during 2027, bringing the overnight deposit rate down to 11% by the end of the year.

The report also noted that the central bank could begin easing monetary policy before inflation officially returns to its target range, similar to its approach during the previous rate-cutting cycle in 2025.