(Bloomberg) -- Egypt’s central bank will review interest rates for the first time since delivering its biggest—ever hike when authorities devalued the pound in March. Goldman Sachs Group Inc. is the lone outlier predicting a cut.

The prospect of easing policy has emerged as an option after a two-month inflation slowdown unbroken by a one-time crash of around 40% in the official exchange rate. But with rates still negative when adjusted for current inflation, all economists except one predict the central bank will keep the benchmark at 27.25% on Thursday.

For Goldman, which calls this week’s decision “finely balanced,” the argument hinges on the idea that Egypt’s real rates are already “well above neutral on a forward-looking basis.” The Wall Street bank expects a cut to 25.75% and anticipates a cumulative 625 basis points of easing by year-end.

Price growth is “declining due to pound stability and easing supply constraints more than anything else,” said Farouk Soussa, an economist at Goldman. “We don’t think there is widespread buy-in in Egypt that higher rates are helpful in bringing inflation down.”

Egypt combined its long-awaited currency devaluation on March 6 with a 600 basis-point rate hike that helped seal an expanded loan program from the International Monetary Fund. The moves came after Cairo struck a historic investment deal with the United Arab Emirates, unlocking more financing that brought the total secured by Egypt to $57 billion.

An inflationary shock hasn’t materialized because many goods were already long priced in line with the pound’s much weaker value on the local black market. The bailouts are also ending Egypt’s deep shortages of foreign exchange, a key driver of inflation.

The devaluation effectively closed the gap with the unofficial market rate and hobbled the parallel trade. Since then, the pound has been one of the world’s best performers, appreciating by more than 7% against the dollar as a weaker exchange rate and higher rates supported inflows into local bonds.

Coming off a record high of 38% in September, annual inflation slowed to 32.5% last month. Price pressures are fading thanks largely to greater availability of foreign exchange and a recent government and private-sector initiative to limit the cost of key items like dairy products and cooking oil.

The IMF expects a slight deceleration in price growth next month and sees it slowing to 15.3% by the end of next fiscal year in June 2025. Egypt hasn’t lowered rates after the pandemic year of 2020, more than tripling its benchmark since early 2022.

The IMF’s expanded $8 billion program for Egypt focuses on maintaining tight policies, which may prompt the central bank to delay rate cuts until after the fund’s next review scheduled for June. 

Authorities are also likely to be mindful of not spooking portfolio investors, who have piled into Egypt’s local bonds at a record pace after the latest devaluation.

A rate cut may well be on the agenda given signs of stability in inflation as well as the burden placed by high rates on the budget and weak domestic demand, according to Simon Williams, economist for Central and Eastern Europe, the Middle East and Africa at HSBC Holdings Plc. For now, however, the most likely choice is a hold, he said.

“Given the stress placed on restoring monetary policy credibility in the March IMF program and the importance of anchoring the new FX regime, we think cuts at this stage would be premature,” Williams said.

--With assistance from Joel Rinneby.

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