The International Monetary Fund said Egypt should proceed cautiously with interest rate cuts, given the global uncertainty resulting from US President Donald Trump's recent decisions on tariffs, according to Bloomberg.
Earlier in April, the Central Bank of Egypt cut interest rates for the first time in nearly five years, after the annual inflation rate fell to 13.61%, less than half of its peak in September 2023.
Despite some revised forecasts following Trump's decisions, many economists believe the Central Bank of Egypt may cut interest rates by a combined 600 to 800 basis points in 2025.
"Any additional cuts should be approached with caution," Jihad Azour, director of the IMF's Middle East and Central Asia Department, was quoted by Bloomberg as saying.
"It is extremely important to be vigilant in managing monetary policy. In light of the current shocks, we see risks of a return to inflation, so it is essential to maintain a sound policy that leads to reducing inflation to stable single-digit levels," Azour said in an interview in Washington.
In March 2024, the central bank raised interest rates to a record high in conjunction with the currency devaluation, and rates remained unchanged until a 225 basis point cut last month to 251 TP3T.
The Monetary Policy Committee announced at the time that inflation is expected to continue declining during this year and next, albeit at a slower pace compared to the first quarter of 2025. However, it pointed to upside risks, including "the trade war between China and the United States and the escalation of regional geopolitical conflicts."
Despite the recent cut, Egypt's real interest rate remains among the highest in the world, at around 11.51 TP3T.
Dr. Mohamed Maait, Executive Director of the International Monetary Fund for Arab Countries and the Maldives, stressed the importance of caution in making monetary decisions.
“Given the current global and regional situation, you have to be extremely careful, and you have to be absolutely sure that the decision is correct before making it, based on data, analysis, and information. You cannot make a decision and then backtrack on it later,” Maait, who served as Egypt’s finance minister until last year, said in an interview in Washington.
