- Decision
- Lower
- Rate change
- 100 bps
- overnight deposit rate
- 24%
The Monetary Policy Committee of the Central Bank of Egypt on 22 May 2025 cut the overnight deposit rate by 100 bp to 24.00%, the overnight lending rate to 25.00%, the main operation rate to 24.50% and the discount rate to 24.50%, judging that moderating headline and core inflation and a still-negative output gap allow further monetary easing while guarding against residual risks. This follows a 225 bp cut in April after a February hold, taking the deposit rate down from 27.25% at the start of the year. The CBE cited a nowcast of 5.0% real GDP growth in Q1 2025 (up from 4.3% in Q4 2024) and a marginally lower unemployment rate of 6.3%, but noted output remains below potential, limiting demand-side price pressures as headline and core inflation stabilised at 13.9% and 10.4% in April, on course for the 7 % ± 2 pp Q4 2026 target. Easing upside risks linked to improved exchange-rate dynamics and lower sovereign risk, alongside softer global growth forecasts and supply-driven but moderating commodity prices, supported the decision, though the Committee flagged lingering threats from trade protectionism and regional geopolitical tensions. The MPC will adjust policy “on a meeting-by-meeting basis” and stands ready to deploy all tools to keep disinflation on track.
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.