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Daily Economic Update
02.10.2025Egypt: The CBE is widely expected to deliver another 100 bps rate cut today, continuing its cautious approach. Even with such a move, real interest rates would remain close to 10%, offering an attractive cushion for carry trade investors and maintaining Egypt’s relative appeal compared to other emerging markets. However, policymakers are unlikely to go deeper at this stage. The upcoming removal of fuel subsidies this month, combined with additional fiscal consolidation measures planned for the final quarter of the year, create uncertainty about inflationary pass-through effects. On top of that, the IMF team is currently in Cairo hoping to conclude the fifth and sixth reviews of its program, which puts the CBE under extra scrutiny to ensure monetary credibility towards inflation targeting. On the other hand, holding rates unchanged would risk discouraging the business sector and complicating budget preparations for 2026. The lag effect of monetary easing (estimated at seven to nine months) needs to remain intact to support investment and demand. In essence, today’s decision is about fine-tuning: easing just enough to support growth while avoiding any signal of complacency toward fiscal reforms and inflationary risks.
Egypt: The MoF successfully priced a $1.5 billion dual-tranche sukuk issuance amid robust demand $9 billion. The Ministry of Finance (MoF) successfully sold a $1.5 billion dual-tranche sukuk comprising one 3.5-year tranche of $700 million yielding 6.375% and a second, 7-year tranche of $800 million at 7.95%. The issuance garnered more than $9 billion in subscriptions, underscoring strong demand for Egyptian paper, and is scheduled for October 7, 2025. On a weighted basis, this sale translates into an average cost of 7.2% with a duration of 5.25 years. Crucially, both tranches were priced below comparable Eurobond yields in the secondary market: about 20 bps lower for the short tranche and 35 bps lower for the longer one. This outcome sends two important signals: (i) it reflects growing investor confidence in Egypt’s sovereign credit story despite global uncertainty; and (ii) it validates the government’s debt management strategy, which focuses on diversifying financing tools, lowering borrowing costs, and extending maturities. By successfully executing this issuance at tighter spreads, the MoF is not only reducing immediate financing costs but also building momentum in its efforts to improve debt sustainability. Looking ahead, consistent performance in the sukuk market could become a cornerstone of the authorities’ attempts to broaden Egypt’s investor base and strengthen the state’s resilience against external funding shocks.
Saudi Arabia: Softer yet still strong credit growth in August. Total bank credit growth eased to 14.6% y/y (9.5% ytd), in August, decelerating for the fourth consecutive month from a peak of 16.5% in April. The slowdown was mainly due to softer, albeit still strong, growth in private sector credit (13.3% from 13.9%), which continued to comprise the bulk (93%) of total lending. Personal loan growth rose to 8.7% y/y (from 8.4% in July), reflecting continued strength in the consumer sector. In contrast, residential new mortgage financing for individuals fell by 11.2% y/y, the sharpest decline in almost two years amid recent signs of moderating activity within the residential real estate market. Although still lagging behind credit growth, deposit growth strengthened to 8.7% y/y (from 8.4%), helped by solid increases in government deposits (9.2% y/y), leading to a marginal decline in the loan-to-deposit ratio to 111% from a record high of 112% in July. Net foreign assets fell deeper into negative territory amid ongoing external funding and tighter domestic liquidity, which is likely to continue on strong private investment and consumption-driven credit demand. Still, the NFA position remains within acceptable limits relative to total bank assets and the low share of foreign liabilities to total liabilities.
US: ADP September jobs sharply below expectations; Supreme Court blocks firing of Governor Cook for now. The private sector shed 32K jobs in September, significantly weaker than the 50K expected increase with August’s numbers revised sharply downward to a negative 3K from a positive 54K, as per the ADP report. This series now shows a loss of private sector jobs in three of the last four months. While job growth as per the ADP does not have a high correlation with the official BLS one on a monthly basis, we note that both series move hand in hand over the long term. Following the release, the probability of a Fed rate cut in October increased, standing at near certainty (99%). The US labor market continues to generally be in a low-hiring, low-firing mode amid low unemployment, driven by both supply and demand factors. The risk in such an environment is that, if the rate of firings picks up, the unemployment rate can increase rather quickly. Meanwhile, the ISM manufacturing PMI inched up to 49.1 in September (48.7 in August), very marginally above expectations, but continuing in contraction territory for the seventh straight month. Firms continued to shed jobs (45.3 vs. 43.8 in August) for the eighth straight month, and the measure of prices remained elevated at 61.9 in September (63.7 in August) indicating ongoing inflation pressures. Finally, in a blow to President Trump and a win for Fed independence, the Supreme Court blocked his firing of Fed Governor Cook for now, pushing that matter till mid-January when the justices will hear the arguments in the case.
Eurozone: Inflation edged higher in September, but in line with expectations. Consumer price inflation rose to 2.2% y/y in September, in line with consensus expectations and up from 2.0% in August, largely reflecting higher services inflation and softer energy price declines (-0.4% y/y versus -2.0% in August). Core inflation held steady at 2.3% y/y for the fifth consecutive month. Meanwhile, services inflation—viewed as a gauge of domestic price pressures—remained elevated in September at 3.2% y/y (3.1% in August). While headline inflation has ticked up, the ECB sees this as temporary, forecasting that it will average an on-target 2% in Q4 and dip below that going into 2026. ECB President Lagarde described the risks to inflation as “contained in both directions". Overall, the data supports the ECB’s current wait-and-see approach, with no immediate pressure to adjust rates from current levels.
UK: House prices rise by more than expected in September. UK house prices rose by 0.5% m/m in September, recovering from a limited 0.1% drop in August, and by 2.2% y/y (2.1% in August), according to Nationwide data. Housing market activity is still normalizing after April’s stamp duty changes, and as such price movements in recent months have been rather volatile. Although mortgage rates have come down, supported by the Bank of England’s (BoE) easing of policy interest rates, further progress is uncertain as the BoE is expected to proceed more carefully going forward. With less support from lower policy rates, softening wage growth, and still-elevated consumer price inflation, the outlook for house price increases in the near-term is uninspiring. Additionally, the government’s upcoming Autumn budget may add to the uncertainty and lead to extra caution among potential homebuyers.