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Mohamed Abu Basha, Chief Economist at the Research Department of EFG Hermes, said that the most likely scenario is for the Central Bank of Egypt to keep interest rates unchanged during the third quarter of 2026, amid a gradual decline in inflationary pressures and continued uncertainty related to geopolitical developments in the region.

Abu Basha explained, in an interview with Al Arabiya Business, that the inflation data for June was positive, as it showed a decline in the monthly rate, with only a slight rise in core inflation, reflecting the ebbing of the inflationary wave that accompanied the outbreak of war in the region. He noted that the central bank expects a limited acceleration in inflation over the next two months, but at a slower pace than its previous expectations.

He added that the tone of the central bank in its latest statement confirms its adoption of a cautious tightening monetary policy, supporting expectations of keeping interest rates at their current levels. He pointed out that there is a 20% to 30% probability of an interest rate cut by the end of 2026 if inflation continues to slow.

Abu Basha predicted that the inflation rate would peak at around 16% in August, before gradually declining to about 13% by the end of the year, stressing that the central bank will not rush to ease monetary policy until it confirms the sustainability of this trend.

He indicated that the central bank bases its expectations on the assumption of a cautious calm in regional conditions, benefiting from the Egyptian pound's appreciation of more than 6% over the past period, along with the decline in global oil prices, both of which support containing inflation.

Abu Basha stressed that any new escalation in the region could lead to fluctuations in the exchange rate and energy prices, but he believes its impact will be less severe compared to what happened in March. He explained that the government and central bank are handling developments cautiously, without rushing to take new measures, awaiting clarity on the geopolitical and economic trajectory.

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