Trump’s tariffs likely to limit Egypt’s expected interest rate cut

A majority of economists interviewed by Bloomberg anticipate Egypt will announce an interest rate cut this Thursday, as the country looks to stimulate economic growth and ease borrowing costs amid a cooling inflationary environment. Inflation is less than half of what it was at its peak in September 2023.

Most economists surveyed by Bloomberg anticipate a reduction, with forecasts ranging from 75 to 225 basis points.

The wide margin reflects uncertainty caused by recent U.S. trade measures. Although Egypt faces a relatively modest 10% tariff on its exports—lower than those imposed on several other Middle Eastern nations—the policy has still rattled markets. The Egyptian pound suffered its sharpest drop in a year following the tariff announcement, though it recovered slightly after President Donald Trump introduced a 90-day delay on higher tariffs for multiple trade partners.

“Global market volatility is going to be a big issue,” said Simon Williams, HSBC’s chief economist for Central and Eastern Europe, the Middle East, and Africa. “I don’t see enough in the inflation dynamic to merit real rates staying so high, especially with growth weak. It’s going to be tight, but I think they cut.”

Egypt’s benchmark deposit rate is currently at 27.25%, one of the highest globally. As central banks across Africa grapple with the effects of Trump’s protectionism, each is weighing the challenge of curbing inflation against the need to support economic expansion.

For Egypt, the stakes are especially high. Lowering rates would ease pressure from its hefty public debt load and support government efforts to pivot toward a consumer-driven economic model.