Everyone in Egypt is talking now about an interest reduction coming soon, and all the talk is that this reduction will occur at the beginning of the new year in 2025. I wonder what the truth of this talk is and how much the interest reduction will reach you.
All people were anticipating a reduction in interest rates at the last meeting of the Monetary Policy Committee of the Central Bank, which was in October, but the Monetary Policy Committee decided to keep interest rates in their natural form without any reduction or increase, and this was the opposite of the expectations that had confirmed the necessity of reducing. The benefit is to confront the inflation that exists in Egypt.
Ok, what will happen in Egypt regarding interest rates in the coming period?
Morgan Stanley, which is one of the most important and largest international American banks, expects that the central bank will begin gradually reducing interest rates starting in 2025, and it will reach 17.25% on deposits by December 2025 from the current 27.25% in banks.
Morgan Stanley Bank said in its report that the decisions of the Monetary Policy Committee at the Central Bank of Egypt during 4 meetings to keep interest rates unchanged at their high levels of 27.25% for deposits and 28.25% for lending, which will remain in this form until the end of the month of December, was an attempt to put Limit and stop the inflation rate.
The World Bank expected a significant decline in the inflation rate to 14% and 15% on an annual basis in the first quarter of 2025. This is part of the steps and efforts of the Central Bank to stop the inflation rate, which has accelerated in the last 3 months in a row and recorded 26.5% last October after it reached 26.4% in September also responded due to government decisions to increase the prices of gasoline and diesel.
The bank also said in its report that the inflation rate up to this moment is very far from the central bank’s targets, which it wants to achieve in the coming month of December, and the target is to reach 5% to 9%.
The bank also said that real interest rates will remain high at first before returning to normal at about 3.5% in the second half of 2025.
Ok, what will happen if interest rates are reduced?
The first thing is that reducing the interest rate will revive the pace of borrowing for individuals and companies, and this means a significant recovery in economic activity because there are many large companies, especially real estate development companies, for example, that depend for their work on financing programs from banks, and this also means that the prices of these products will fall due to reducing costs, and reducing interest will also encourage Many people take loans and start their own projects to improve their income.
At the same time, reducing interest will raise gold prices because many people will decide to transfer their investments into savings certificates, for example, and the interest on them is expected to decrease with the expected reduction decision and will go to other markets, such as gold, as it is a guaranteed and safe investment after savings certificates and the increase in demand for gold will certainly raise its price significantly.
