Morgan Stanley Expects Central Bank of Egypt to Keep Interest Rates Unchanged Until End of 2026

Morgan Stanley believes that the Central Bank of Egypt will keep interest rates unchanged until the end of 2026, but sees a higher likelihood of a 2% rate cut in the final quarter of the year if inflation falls below 13%, a condition the bank ties to potential monetary easing.

The bank explained that this potential cut would keep the real interest rate positive at around 4%, meaning the yield on financial instruments would remain higher than the inflation rate. The real interest rate refers to the difference between the nominal interest rate and the inflation rate, and keeping it positive means that returns on savings exceed price rises, supporting the stability of capital flows into the banking sector.

The report projected the exchange rate of the US dollar against the Egyptian pound to range between 46 and 52 EGP in the fiscal year 2026/2027 across three scenarios: a base scenario between 48 and 50 EGP, a bullish scenario between 46 and 48 EGP, and a bearish scenario between 50 and 52 EGP.

The report noted expectations for remittances from Egyptians abroad to reach around $43 billion, with net foreign direct investment reaching about $14 billion in the base scenario. These inflows are among the most crucial sources of foreign currency for Egypt, as they support foreign exchange reserves and ease pressure on the exchange rate; furthermore, their forward-looking nature ties investor expectations to the trajectory of monetary policy during the upcoming fiscal year.

What do these terms mean?

Real Interest Rate: The nominal interest rate minus the inflation rate. Exchange Rate: The value of the pound against the dollar. Net Foreign Direct Investment: Foreign investments in domestic projects minus divestments. Remittances: Money sent by workers abroad to their home country.