Goldman Sachs Breaks Away from the Pack Anticipating Interest Rate Hike in Egypt

SadaNews - Goldman Sachs expects that the Central Bank of Egypt will raise the main interest rate by a full percentage point on Thursday, according to data collected by Bloomberg.

The data showed that the bank anticipates an increase in the overnight deposit rate from 19% to 20%, in contrast to seven forecasts that expect it to remain unchanged, including banks such as Bank of America and Morgan Stanley.

A survey conducted among analysts at 11 financial institutions leaned towards keeping interest rates unchanged, anticipating rising inflationary pressures due to the repercussions of the Iran war on energy prices.

The central bank had previously kept interest rates unchanged during its last meeting, stabilizing the overnight deposit rate at 19%, the lending rate at 20%, and the main operation rate at 19.5%.

This followed an extensive monetary easing cycle in 2025 during which the central bank reduced interest rates by a total of 725 basis points, prior to implementing an additional reduction of 100 basis points at the first meeting of 2026 last February.

Growing Caution Regarding Price Trajectory

The Central Bank of Egypt has previously increased its caution regarding the expected trajectory of prices, especially after raising its estimates for the average annual inflation rate to 17% instead of 11%, anticipating the acceleration of inflationary pressures starting from the second quarter until the end of this year, according to the monetary policy report issued on May 10.

In April, the annual inflation rate slightly slowed down after a surge recorded in the previous month due to the repercussions of the Iran war and rising energy costs.

In contrast, the bank lowered its economic growth forecasts, expecting a slowdown in activity during the second half of the year, revising its estimates for real GDP growth to 4.9% and 4.8% for the current and next fiscal years, compared to previous forecasts of 5.1% and 5.5%.

The central bank was not the only one to adopt a cautious approach; Jihad Azour, Director of the Middle East and Central Asia Department at the International Monetary Fund, has previously urged Egypt to monitor the impact of rising energy prices on inflation during the upcoming period, indicating that if price pressures continue, authorities, like any other country, should activate monetary policy tools.

He added: The repercussions of the war on the Egyptian economy remain "relatively limited", after authorities allowed the exchange rate to play the first line of defense against shocks, along with increasing energy prices and focusing support on the most needy groups.