What does an interest rate cut mean? When people hear the phrase "the interest rate has been cut," they often wonder: what does this really mean, and why should I care? In simple terms, the interest rate is the price of money — it's what banks pay on deposits and what they charge for loans. When rates go up, savers earn more but borrowing becomes more expensive, so people and businesses borrow less and spending slows, which helps bring prices down. When rates go down, savers earn less, but borrowing becomes cheaper, making it easier for companies to invest and for households to buy homes, cars, or other goods. In short, interest rate decisions affect everyone's daily life, from food prices to real estate to the pace of the economy. What happened? The Central Bank of Egypt (CBE) announced a 100 basis point cut in interest rates, bringing the overnight deposit rate to 22%, the lending rate to 21.5%, and the main operation rate to 21%. This is not the first cut — it continues a cycle of reductions that began in early 2025, totaling 525 basis points so far. The message is clear: inflation is cooling, and the economy needs a new push for growth. What does this mean for monetary policy? In recent years, the CBE kept raising rates to fight inflation. Higher rates made borrowing more expensive, so people and businesses slowed down, demand eased, and prices stabilised. That approach worked when global prices were surging. But today, inflation in Egypt has started to decline, and the central bank now feels confident enough to ease pressure. The new cut sends a strong signal: "inflation is under control, and it's time to encourage investment and consumption." This marks a clear shift from tight, defensive policy to a more supportive stance aimed at growth. How does the decision affect savings, investment, consumption, gold, and markets? The impact of the cut will be felt across the economy. For savers, deposit returns will be lower, pushing some to move their money into gold, the stock market, or real estate. For businesses, cheaper loans will make it easier to expand, with investments expected to rise by 5–7% in the coming year. For consumers, personal, car, and housing loans will cost less, boosting household purchasing power and raising demand by 3–5%. Markets will also shift: part of the liquidity that was locked in bank deposits will flow into equities and projects, potentially channeling EGP 30–40 billion into the stock market within a year. Gold demand is projected to rise by 5–8%, as people turn to it as a traditional safe haven. Banks: repositioning in the era of lower interest rates Banks are the first sector to feel the impact. Lower rates will squeeze margins on deposits and government instruments, cutting into short-term profits. But lending volumes are expected to rise by 8–10% annually, making up for much of that loss. Banks will need to rely more on the real economy by financing companies and households, while boosting revenues from services like transfers and digital banking. The challenges are real: managing higher credit risks as loan portfolios expand, attracting deposits despite lower returns, and absorbing higher costs from investing in technology. At the same time, long-term investors are expected to gain more confidence, with foreign direct investment projected to add $1–2 billion in 2025–2026. For Egypt's banks, this phase can best be described as a repositioning in the era of lower interest rates. Real estate: the biggest winner Real estate is likely to benefit the most. Lower mortgage costs will encourage more households to buy homes, while developers will find it easier to finance new projects. Demand for housing units is expected to rise by 5–10%, with developer financing projected to increase by around 12% next year. The sector's ripple effect will also stimulate related industries such as construction and building materials. In Egypt, property has long been both a consumer need and a safe investment, and this decision only strengthens its role. Industry regains momentum Factories that hesitated to borrow under high rates will now find financing more affordable. Production in food processing, pharmaceuticals, and chemicals could grow by 4–6%. Lower financing costs will cut production expenses, making Egyptian exports more competitive abroad. The challenge will be ensuring that businesses use these loans to modernise production and improve quality, not just to cover operating costs. Tourism gains fresh confidence Tourism is one of the sectors most sensitive to stability. Cutting rates strengthens Egypt's image as a safe and stable market for both tourists and investors. The sector is expected to grow by 4.5–5% in 2025, raising its contribution to GDP to about 8.5%. The decision should encourage investment in hotels, resorts, and new projects, expanding Egypt's capacity to welcome more visitors. With global travel recovering, Egypt's monetary stability gives it an edge in regional competition. Trade and domestic markets pick up Cheaper loans will boost consumer purchasing power, pushing retail sales up by 3–4% in the next year. This creates a positive cycle: households spend more, retailers sell more, and companies expand further. Stock market and financial services benefit Financial services, led by the stock exchange, will be among the biggest winners. As money flows out of deposits, equities will attract new capital. The stock market could see EGP 20–25 billion in new inflows during the first half of 2026, making it more attractive for both domestic and foreign investors. An interest rate cut is not just a technical move. It is a clear message from the central bank: inflation is easing, the market is ready, and the Egyptian economy is preparing for a new takeoff.
