- Decision
- Lower
- Rate change
- 100 bps
- overnight deposit rate
- 19%
The Monetary Policy Committee of the Central Bank of Egypt on 12 February 2026 lowered the overnight deposit, overnight lending and main operation rates by 100 bp to 19.0 %, 20.0 % and 19.5 %, respectively, and cut the discount rate to 19.5 %, while the Board of Directors reduced banks’ required-reserve ratio to 16 % from 18 %, judging that softer inflation and a still-negative output gap warrant further easing. After a series of moves that included 200 bp in August and 100 bp in both October and December, the deposit rate is now 500 bp below its May 2025 level. The RRR cut is intended to keep liquidity conditions consistent with policy transmission. Annual headline and core inflation eased to 11.9 % and 11.2 % in January from 12.3 % and 11.8 % in December and are projected to stay near current levels in Q1 before declining toward the 7 % ± 2 pp target by Q4 2026; GDP growth is seen moderating to 4.9 % in Q4 2025 but averaging 5.1 % in FY 2025/26 as activity edges toward potential. A recent exchange-rate appreciation has helped temper non-food price pressures, supporting an improving external position. Globally, resilient growth is offset by risks from geopolitical tensions, trade uncertainty and potential supply-chain disruptions, while plentiful commodity supplies have kept inflation contained. The Committee affirmed it will calibrate the scale and pace of future easing to the inflation outlook and stands ready to adjust tools to ensure price stability.
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.