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Securities & Investment

Tag: CBE decision

HC expects the CBE to keep the policy rates unchanged

Posted on by Marwa Nakhla

  • In light of Egypt’s macro economy developments and the geopolitical conditions, the Research Dept. at HC Securities & Investment expects the CBE to keep the policy rates unchanged at its upcoming May 21, 2026 meeting.

Financials analyst and economist at HC, Heba Monir commented: “The regional geopolitical turbulence from the US-Israeli war against Iran, which began on 28 February, is still affecting the global economy as and Egypt. Egypt’s improved external position and flexible exchange rate managed to relatively absorb the conflict’s implications until now. Despite Egypt recording net foreign outflows of USD3.2bn from its treasury secondary market from 19 February until the end of April, its net international reserves (NIR) increased by a total of USD263m in March and April to a record USD53.0bn in April, while deposits not included in the official reserves declining by a total of USD2.60bn in March and April to USD10.8bn; however, Egyptian banks’ net foreign assets (NFA) dropped significantly by USD8.18bn during February and March, to USD21.3bn by the end of March, mainly due to the net foreign outflows from Egypt’s treasury market, leading to a c10% y-t-d EGP devaluation to EGP52.9/USD, as of 15 May, showing exchange rate flexibility. Domestically, the government raised diesel, LPG cylinders and octane gasoline prices in March by an average of c19% on 10 March and the natural gas for the industrial sector (cement, iron, steel, non-nitrogen fertilisers, and others) on 3 May, due to mainly a c51% surge in oil prices to USD109/bbl, in addition to a c58% increase in natural gas prices (Dutch TTF – Front month futures) to USD17.1/MMBtu and c5% increase in wheat prices to USD244/ton, which pressure the FX liquidity and will result in inflationary pressures, in our view. To prevent dollarization and tighten money supply, public banks increased the interest rate on newly issued three-year certificates of deposit (CDs) by around 1.25% to an average of 17.25%, prompting private banks to follow suit and issue similar products with a higher minimum amount per CD; which should also help limit inflation acceleration and support pensioners who rely on high-yielding CDs. Regarding the treasury yield, the CBE slightly reversed the direction of interest rates on treasuries to keep the carry trade attractive, where the latest 12M T-bills auction of 24.4% implied a positive real interest rate of 4.57% using our 12M inflation estimate of c16% (after deducting a 15% tax rate for European and U.S. investors). Therefore, given the geopolitical risks and their implications for Egypt’s USD resources, our upward revision of inflation estimates, the need to maintain the carry trade attractiveness, and the budget deficit targets, we expect the MPC to keep interest rates unchanged at its 21 May meeting.”

It is worth mentioning that, at its 2 April meeting, the Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) maintained the benchmark overnight deposit and lending rates at 20.0% and 21.0%, respectively, reversing a total of 825 bps since 2025 of a total 1,900 bps rate hikes since the CBE started its tightening policy in 2022. The MPC also reduced the required reserve ratio (RRR) for commercial banks by 200 bps to 16.0% from 18.0% in February 2026. Egypt’s annual headline inflation decelerated to 14.9% y-o-y in April from 15.2% y-o-y in March, according to the Central Agency for Public Mobilization and Statistics (CAPMAS) data. Monthly prices increased by 1.1% m-o-m in April, compared to an 3.2% m-o-m increase in March. On the global front, on 26 April, the U.S. Federal Reserve maintained the target range for the federal funds rate at 3.50-3.75% with total cuts of 175 bps since September 2024, after it hiked rates by 525 bps since it started tightening policy in 2022, and on 30 April, the European Central Bank (ECB) maintained the key ECB interest rates for the deposit facility, the main refinancing operations and the marginal lending facility at 2.00%, 2.15% and 2.40%, respectively, bringing total cuts to 200 bps, since it started cutting rates in June 2024 after it hiked rates by 450 bps since it started its tightening policy in 2022.

About HC Securities & Investment

 HC Securities & Investment is a leading investment bank in Egypt and the MENA region. Since its inception in 1996, HC has utilized its relationship-driven insights, local and regional market knowledge, and industry-specific expertise and strong execution capabilities to provide its clients with a wide range of services in investment banking, asset management, securities brokerage, research, custody and online trading through its offices in Egypt and the UAE (DIFC). HC Investment Banking has an outstanding track record of advising leading corporates in Egypt and the MENA region on M&A, capital market, and financing transactions in excess of USD6.6bn. HC Asset Management now manages 7 mutual funds for commercial banks and portfolios for institutions and sovereign wealth funds with assets under management in excess of EGP5.6bn. HC Brokerage is ranked among the top brokers in Egypt and provides a wide array of services, including research and online trading to institutional and retail clients.

 

HC: The CBE could maintain rates at its upcoming meeting

Posted on by Marwa Nakhla

HC comments: ” Egypt’s external position is showing resilience with: (1) net international reserves (NIR) inched up c1% m-o-m with a c6% y-t-d increase to a record USD50.1bn in October; (2) Egyptian banks’ net foreign assets (NFA) position widening significantly by c16% m-o-m and 3.98x y-t-d to USD20.8bn in September; (3) Egypt’s worker remittances increasing c35% y-o-y in August to USD3.5bn, while declining c8% m-o-m, reflecting confidence in the FX liquidity in Egypt; (4) Egypt’s 1-year CDS declining remarkably to 176 bps from 379 bps at the beginning of the year; (5) and Suez Canal revenues starting to recover in November following the Gasa ceasefire. All these factors had helped Egypt’s exchange rate to appreciate by c8% y-t-d against the USD.”

” Domestically, the PMI index rose to 49.2 in October from 48.8 in September, on improved demand; however, still below the 50 benchmark. Consumer prices are cooling off, with an accumulated m-o-m increase of c11% in 10M25, compared to c22% accumulated m-o-m increases in 10M24, although we see inflation accelerating in November by 13.0% y-o-y and 0.9% m-o-m, due to the second round effects of the 17th October energy price hikes; however, we still see inflation following a downward trajectory thereafter. As for the attractiveness of Egypt’s carry trade, the latest 12M T-bills auction of 25.49% implies a positive real interest rate of 10.7% using our 12M inflation estimate of c11% (after deducting a 15% tax rate for European and US investors), suggesting that Egypt’s Carry Trade remains attractive. Meanwhile, the recent drop in Egypt’s CDS would lower the required yield on treasuries by foreign investors, which is not yet reflected in the recent treasury auctions, in our view. Although the CBE could maintain rates at its upcoming meeting, we believe that there is room for a 100 bps cut to stimulate the economy and the private sector, due to the parameters mentioned above and our view on inflation.”

HC still see room for the CBE to cut the policy rates by 200 bps

Posted on by Marwa Nakhla

  • In light of Egypt’s macro economy developments and the geopolitical conditions, HC Securities & Investment expects the CBE to cut the policy rates by 200 bps at its upcoming August 28, 2025 meeting.

Financials analyst and economist at HC, Heba Monir commented: “We see Egypt’s external position stabilizing as per the following indicators: (1) the c5% EGP appreciation y-t-d to EGP48.6/USD (2) Egypt’s 1-year CDS retreating to 267 bps from 379 bps at the beginning of the year, (3) Egypt’s worker remittances increasing c13% m-o-m and c17% y-t-d in May to USD3.4bn, reflecting confidence in the FX liquidity in Egypt, (4) Net International Reserves (NIR) inching up c1% m-o-m and c4% y-t-d to USD49.0bn in July, and (5) Egyptian banks’ net foreign assets (NFA) position widening by c2% m-o-m and c72% y-t-d to USD14.9bn in June. On the flip side, (a) deposits not included in official reserves decreased by USD1.72bn m-o-m to USD8.70bn in July from USD10.420bn in the previous month, which we attributed to the government paying USD1bn of its liabilities to foreign oil companies operating in Egypt in July and the higher energy import bill for power generation, (b) the BOP recorded an overall deficit of USD1.37bn in 3Q24/25, reversing a surplus of USD489m in 2Q24/25, due to the reversal of the financial accout into a net outflow of USD256m from a net inflows of USD4.14bn in 2Q24/25, which was mostly related to other external dues repayments. Domestically, the PMI index increased to 49.5 in July from 48.8 in June, still below the 50.0 mark, due to signs of recovery in demand, particularly in the services sector. Regarding the energy prices, the government decided to postpone increases in the electricity and natural gas prices. For the electricity prices, the government decided to postpone hikes until October, after it was initially scheduled to take place at the beginning of FY25/26, due to the current economic conditions and the high consumption bills during the summer. As for natural gas prices, the government postponed increasing the price for the industrial sector by USD1/mmbtu, instead of applying it in August, as the fertiliser companies requested the government to increase local subsidised fertiliser prices if it increases natural gas prices. As for the attractiveness of Egypt’s carry trade, the latest 12M T-bills auction of 26.08% implies a positive yield of 6.66% using our 12M inflation estimate of 15.5% (after deducting a 15% tax rate for European and US investors), which also aligns with our estimates, suggesting that Egypt’s Carry Trade remains attractive. Despite the anticipated hike in energy prices, we still see room for the MPC to cut the policy rates by 200 bps mainly due to (1) the recent inflation deccelration for two consecutive months, (2) the need to stimuilate economic growth and ease the burden on the private sector, (3) the relative stability in Egypt’s external position, (4) the deflationary effect of the recent EGP appreciation, and (5) the still attractive carry trade despite the interest rate cut expectation.”

It is worth mentioning that, at its 10 July meeting, the Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) maintained the benchmark overnight deposit and lending rates at 24.0% and 25.0%, respectively, after it had cut policy rates by 325 bps in 1H25 of a total 1,900 bps rate hikes since the CBE started its tightening policy in 2022. Egypt’s annual headline inflation decelerated to 13.9% in July from 14.9% in June, according to the Central Agency for Public Mobilization and Statistics (CAPMAS) data. Monthly prices inched down 0.5% m-o-m compared to a 0.1% m-o-m decrease in June. On the global front, on 30 July, the U.S. Federal Reserve maintained the target range for the federal funds rate at 4.25-4.50%, leaving the total cuts at 100 bps after it hiked rates by 525 bps since it started tightening policy in 2022, and on 24 July the European Central Bank (ECB) maintained the key ECB interest rates for the deposit facility, the main refinancing operations and the marginal lending facility at 2.00%, 2.15% and 2.40%, respectively, bringing total cuts to 200 bps, since it started cutting rates in June 2024 after it hiked rates by 450 bps since it started its tightening policy in 2022.

About HC Securities & Investment

HC Securities & Investment is a leading investment bank in Egypt and the MENA region. Since its inception in 1996, HC has utilized its relationship-driven insights, local and regional market knowledge, and industry-specific expertise and strong execution capabilities to provide its clients with a wide range of services in investment banking, asset management, securities brokerage, research, custody and online trading through its offices in Egypt and the UAE (DIFC). HC Investment Banking has an outstanding track record of advising leading corporates in Egypt and the MENA region on M&A, capital market, and financing transactions in excess of USD6.6bn. HC Asset Management now manages 7 mutual funds for commercial banks and portfolios for institutions and sovereign wealth funds with assets under management in excess of EGP4bn. HC Brokerage is ranked among the top brokers in Egypt and provides a wide array of services, including research and online trading to institutional and retail clients.