Arab Finance: The Central Bank of Egypt’s (CBE) Monetary Policy Committee (MPC) is expected to keep interest rates unchanged at its August 20 meeting as renewed inflationary pressures offset the resilience of the country’s external position, according to HC Securities & Investment.
“Given accelerated inflationary pressures, we expect the MPC to keep interest rates unchanged at its August 20 meeting,” Heba Mounir, macro analyst at Egypt-based investment bank HC Securities & Investment, said.
HC expects inflation to average around 16% in the third quarter (Q3) of 2026, compared with approximately 15% in the previous quarter. The forecast follows the government’s decision earlier in August to maintain electricity prices for the first household consumption bracket while raising tariffs for the remaining residential brackets by around 12%.
Higher energy costs resulting from the regional war are also weighing on the government’s fiscal consolidation targets, Mounir noted.
Despite these domestic pressures and intermittent geopolitical disruptions, HC said Egypt’s external position remains relatively resilient. Egyptian banks’ net foreign assets rose by $5.04 billion month on month to $27.995 billion in June, up from $22.957 billion in May.
The increase was mainly driven by a $4.81 billion monthly rise in the combined foreign assets of banks and the CBE. Meanwhile, banks’ foreign liabilities fell by $1.06 billion, while the CBE’s liabilities increased by $826 million.
Egypt’s net international reserves and deposits excluded from official reserves also increased in July. The two components rose by a combined $2.72 billion month on month, reaching $56.29 billion and $12.54 billion, respectively.
Egypt’s one-year credit risk indicator has also followed an overall downward trajectory, standing at 190 basis points compared with a peak of 326 basis points at the end of March.
Exchange-rate flexibility helped absorb the impact of the regional conflict, according to Mounir. The EGP weakened by around 13% against the USD from the beginning of 2026 to EGP 54.7 per USD during the first week of April. It subsequently strengthened by approximately 9% to EGP 50.4 per USD, limiting its year-to-date decline to around 5%.
