- Decision
- Lower
- Rate change
- 225 bps
- overnight deposit rate
- 25%
The Central Bank of Egypt’s Monetary Policy Committee cut the overnight deposit rate to 25.00 %, the overnight lending rate to 26.00 % and the main operation and discount rates to 25.50 %, a 225 bp reduction aimed at consolidating the disinflation trend as headline and core inflation fell sharply to 13.6 % and 9.4 % respectively in March amid favourable base effects, waning prior shocks and continued monetary tightness, while real GDP growth exceeded 4.3 % in Q1 2025 yet still operates below potential. After keeping rates unchanged at 27.25 %–28.25 % since February 2025, the Committee judged that the current monetary conditions allowed the start of an easing cycle. Global growth and inflation prospects remain clouded by trade-related uncertainty and volatile commodity prices, with oil prices notably lower, even as geopolitical tensions pose upside risks to inflation. The MPC expects inflation to keep easing through 2025–26, albeit more slowly as fiscal consolidation and sticky non-food prices temper the descent, and reiterated that future decisions will be taken meeting-by-meeting, pledging readiness to deploy all tools to steer inflation toward its 7 % ±2 pp target by Q4 2026.
Rate evolution
From July 2025 to February 2026, the Central Bank of Egypt lowered its key policy rates by 500 basis points, moving from an initial hold to cuts in August, October, December and February before holding them at subsequent meetings through September 2026. The cuts were supported by falling headline and core inflation, softer monthly price dynamics, improving inflation expectations and limited demand-side pressures, although November’s hold interrupted the easing path after headline and core inflation re-accelerated, led by non-food and services prices.
On August 20, the Committee kept the overnight deposit rate at 19.00 percent, the overnight lending rate at 20.00 percent, and the rate of the main operation and the discount rate at 19.50 percent, citing current inflation dynamics and the evolving outlook after annual headline and core inflation rose to 14.9 percent and 14.7 percent, respectively, in July 2026, while monthly measures were unchanged and output remained below potential. It expected inflation to accelerate through the third quarter of 2026 at a slower pace than projected in July before declining from the first quarter of 2027 toward the 7 percent target, plus or minus 2 percentage points, during the second half of 2027, while flagging regional hostilities and a higher-than-expected pass-through from fiscal consolidation measures as upside risks.
On September 24, the Committee again held the rates at those levels after annual headline inflation eased to 14.5 percent in August on lower food inflation, which offset increases in electricity tariffs and housing rents, while core inflation remained relatively stable at 14.9 percent and monthly headline inflation was 0.1 percent. With inflation more favorable than expected, the Central Bank of Egypt lowered its forecast and projected annual headline inflation to stabilize on average in the third quarter of 2026 before gradually converging toward the target during the second half of 2027, judging current policy restrictiveness sufficient to buffer upside risks from regional hostilities, fiscal consolidation measures and international food prices, particularly if global energy prices remain elevated.