Abdel Wahab explained that the drop in the annual urban
inflation rate to 12.3% in November, compared to 12.5% in October, is a
significant indicator of the success of monetary policy in curbing inflationary
pressures. This opens the door for further monetary easing without negatively
affecting price stability, especially as real interest rates remain relatively
high.
He added that the Central Bank of Egypt currently has
sufficient room to maneuver, supported by improvements in the external position
of the economy. This is backed by a rise in net international reserves to a
record high exceeding $50 billion, an increase in remittances from Egyptians
abroad, and improved Suez Canal revenues. These factors strengthen the Egyptian
pound and help curb imported inflationary pressures.
Abdel Wahab indicated that prevailing market expectations
favor a reduction in interest rates of between 100 and 150 basis points. He
described this as a balanced cut that supports economic activity and stimulates
private sector investment without disrupting market stability or triggering
renewed price pressures. He also noted that the US Federal Reserve’s interest
rate cut provides the Central Bank of Egypt with greater room to maneuver
without risks related to capital flows.
He emphasized that any interest rate cut at the upcoming
meeting, if it occurs, would be a continuation of the path initiated by the
Central Bank earlier this year, which has already reduced rates by
approximately 625 basis points following a sharp tightening phase imposed by
high inflation over the past two years.
Regarding expectations for next year, Abdel Wahab predicted
the continuation of monetary easing in 2026, with a gradual reduction of
between 500 and 800 basis points over the year, provided that inflation
continues to decline, global conditions remain stable, and no sharp price
shocks occur in energy or essential commodities.
Abdel Wahab concluded his analysis by highlighting that the
main challenge for monetary policy in the upcoming period is achieving a
delicate balance between supporting economic growth and stimulating investment
on one hand, and maintaining price stability and the strength of the local
currency on the other. He noted that current indicators favor well-considered
easing rather than a sharp or hasty reduction.