- Decision
- Maintain
- Rate change
- 0 bps
- overnight deposit rate
- 19%
The Monetary Policy Committee of the Central Bank of Egypt on 21 May 2026 left the overnight deposit rate at 19.00 %, the overnight lending rate at 20.00 %, the main operation rate at 19.50 % and the discount rate at 19.50 %, judging that a steady, “adequately positive” real interest margin remains appropriate as headline inflation, 14.9 % in April, is projected to rise above the 7 ± 2 pp target in Q4 2026 before easing toward target in H2 2027 while domestic demand stays below potential. After a 100 bp rate cut in February 2026, the MPC has held rates unchanged at its last two meetings. Real GDP growth slowed to 5.0 % y/y in Q1 2026 from 5.3 % in Q4 2025 and unemployment edged down to 6.0 %, supporting the view that demand-side price pressures remain contained. The Committee highlighted upside risks from a weaker exchange rate and fiscal consolidation measures amid regional conflict, alongside volatile global energy and food prices underpinned by heightened geopolitical tensions. It reiterated that policy will stay tight and be recalibrated as needed to steer inflation back to target in H2 2027.
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.