- Decision
- Lower
- Rate change
- 100 bps
- overnight deposit rate
- 21%
The Monetary Policy Committee of the Central Bank of Egypt cut its overnight deposit, overnight lending and main operation rates by 100 bp to 21.00 %, 22.00 % and 21.50 %, and lowered the discount rate to 21.50 %, citing faster-than-expected disinflation and still-subdued demand pressures despite firmer growth. After cumulative net easing of 525 bp since April—punctuated by a pause in July—the committee judged that further accommodation remains consistent with anchoring inflation expectations. Headline inflation fell to 12.0 % y/y in August from 13.9 % in July and is projected to average 12–13 % in Q3 2025 before moderating to about 14 % in 2025 and converging toward the 7 % ±2 pp target band by Q4 2026; core inflation eased to 10.7 %. Real GDP growth quickened to 5.0 % y/y in Q2 2025, lifting FY 2024/25 growth to 4.4 %, yet output remains marginally below potential, containing demand-side price pressures. Globally, modest growth recovery, broadly stable inflation expectations and largely steady oil prices are tempered by risks from geopolitical tensions and trade uncertainty. The committee will calibrate the scale and timing of further easing on a meeting-by-meeting basis and reiterated its readiness to act as needed to keep inflation on the declared path toward 7 % in Q4 2026 and 5 % in Q4 2028.
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.