Daily Economic Update

Egypt: CBE cuts rates by 225bps and will assess further rate cuts on a meeting-by-meeting basis. The Central Bank of Egypt cut policy rates by 225bps, bringing the discount rate down to 25.50% from 27.75%, having kept rates unchanged for almost a year. The move was in line with our outlook of a 2-3% cut. In the press release, the CBE explained that the sharp recent decline in inflation (latest 13.6% y/y) allowed enough room to start the easing cycle. It also mentioned some upside risks to inflation mainly with regards to higher-than-expected pass-through of fiscal measures and uncertainty of the impact of the current US-China trade war and the risk of an escalation of regional conflicts. The statement ended with a key point that the continuation of monetary easing (in terms of magnitude and pace) will be assessed on a meeting-by-meeting basis. In our view, the current dynamics and inflation outlook (14-16% in the coming 6 months) should allow for another 4% of rate cuts as that would bring nominal policy rates close to 21% while still leaving real policy rates close to 5-7%.

US: Trump rachets up pressure on Fed to cut rates, said to be exploring options to remove Powell. President Trump continued to lambast the Fed through his social media posts for not cutting interest rates, saying Chair “Powell’s termination cannot come fast enough.” Economic Council Director, Kevin Hasset, mentioned that the president was exploring his legal abilities to remove Powell from the post of Fed Chair. Meanwhile, the Fed has remained wary of inflationary concerns amid tariff-related uncertainty, maintaining a cautious stance for now. Before the latest flare up, Trump had emphasized that he would let Powell complete the term as the Fed Chair (scheduled to expire in May 2026). Markets are generally concerned that any such acts would seriously undermine the Fed’s independence, which could likely restrain the bank’s ability to sustainably achieve its inflation and employment mandates. On the data front, initial weekly jobless claims (w/e April 12) fell to their lowest since early February of 215K from 224K, but continuing claims (w/e April 5) rose to 1.89mn from 1.84mn the previous week, indicating an overall still-decent US labor market.

Eurozone: ECB cuts rates again as tariffs cloud the outlook. As widely expected, the ECB cut policy interest rates again, lowering the deposit rate by 25 bps to 2.25% on Thursday. The unanimous decision represents the seventh 25 bps cut since June 2024. Importantly, the ECB’s statement dropped reference to their policy remaining “restrictive”, the judgement about which was becoming difficult given recent economic shocks. ECB President Lagarde mentioned that downside risks to the economy have increased due to tariffs, emphasizing that the ECB must remain agile. Specifically, she mentioned that “the major escalation in global trade tensions and associated uncertainties will likely lower Euro-area growth by dampening exports, and it may drag down investment and consumption”. Despite dropping the “restrictive” reference, odds of further easing in 2025 increased post the meeting with markets now indicating around three more cuts before the end of 2025. 

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