Arab Finance: HC Securities & Investment expects the Central Bank of Egypt (CBE) to maintain its key interest rates at its upcoming Monetary Policy Committee (MPC) meeting, citing ongoing geopolitical risks.

Heba Mounir, Macro Analyst at HC Securities & Investment, commented: “Global economic and political instability continues to weigh on the Egyptian economy and has begun to put pressure on the improvement in some of Egypt’s external indicators.”

She added: “On the positive side, Egypt’s banking sector net foreign assets and net international reserves reached record highs of $31.2 billion at the end of August and $57.3 billion at the end of September, respectively.”

The country’s five-year credit default swap (CDS) spreads increased to 343 basis points, up from a year-to-date low of 262 basis points recorded on August 28. Meanwhile, the Egyptian pound depreciated by nearly 14% against the US dollar year-to-date and around 5% since the beginning of October, exceeding its previous peak of EGP 54.73 per dollar recorded on April 7.

The analyst highlighted that geopolitical instability adds pressure from foreign outflows, amid Egypt’s higher import bill for energy products and wheat, in addition to external debt obligations and payments due to foreign oil companies operating in Egypt.

In this regard, foreign currency liquidity is expected to face pressure in the fourth quarter (Q4) of 2026 due to foreign companies repatriating profits at year-end, alongside the potential increase in imports of certain food commodities ahead of Ramadan.

As for domestic inflation, the government committee responsible for fuel pricing decided to keep gasoline and diesel prices unchanged until the end of December 2026, which will help withstand inflationary pressures.

The average inflation is expected to reach approximately 13% in Q4 2026, down from our previous forecast of 14.5%. HC Securities raised its average inflation forecast for 2027 to 11.5%, from 10.9%, citing persistent risks stemming from global instability.

The analysis also addressed the continued attractiveness of Egypt’s debt market, as the latest auction of 364-day treasury bills (T-bills) offered a yield of 25.91%. This implied a positive real interest rate of 10.5%, based on the group's revised 2027 average inflation forecast of 11.5%, after accounting for a 15% tax applicable to European and American investors.  

Mounir concluded: “Accordingly, given the continued attractiveness of Egypt’s debt market and ongoing geopolitical risks, we expect the CBE’s Monetary Policy Committee to maintain its overnight deposit and lending rates at their current levels at its upcoming meeting.”

In September's meeting, the CBE's Monetary Policy Committee (MPC) kept its overnight deposit and lending rates at 19% and 20%, respectively.