Egypt’s central bank said a one-percentage-point cut in interest rates was appropriate to sustain the country’s disinflation trajectory, as inflation continues to ease and economic growth remains resilient.
The Central Bank of Egypt (CBE) said that its Monetary Policy Committee (MPC) had reduced key policy rates by 100 basis points to anchor inflation expectations while maintaining price stability. Overnight deposit and lending rates were cut to 20 percent and 21 percent respectively, while the main operation rate and the credit and discount rate were lowered to 20.5 percent.
The decision followed an assessment of inflation trends and the broader economic outlook since the MPC’s previous meeting in November, the bank said.
At the global level, the MPC noted that economic growth has continued a modest recovery, though uncertainty persists due to trade policy risks, geopolitical tensions and slower global demand. Inflation worldwide has remained broadly stable, prompting central banks in both advanced and emerging economies to proceed cautiously with gradual monetary easing.
Oil prices have declined as global supply exceeded demand, while agricultural commodity prices showed mixed movements, the committee said, adding that risks remain elevated amid potential supply-chain disruptions and geopolitical escalation.
Domestically, the CBE estimates Egypt’s real gross domestic product grew by around 5 percent in the fourth quarter of 2025, slightly lower than the 5.3 percent recorded in the previous quarter. Growth in the third quarter was driven mainly by non-oil manufacturing, trade and communications sectors.
The MPC said the current output trajectory is expected to support a near-term decline in inflation, as demand-side pressures remain contained under the prevailing monetary stance.
Annual headline inflation fell to 12.3 percent in November, resuming its downward trend despite recent fuel price increases. The decline was largely driven by a sharp slowdown in food inflation, which dropped to 0.7 percent, its lowest level in more than four years.
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Core inflation, which excludes volatile food and fuel prices, stood at 12.5 percent, reflecting higher costs in non-food items, particularly services.
On a monthly basis, headline and core inflation rose by 0.3 percent and 0.8 percent respectively in November, levels the CBE said were below typical seasonal patterns, signalling improving inflation expectations and fading effects of earlier shocks.
Looking ahead, the central bank expects headline inflation to stabilise near current levels in the final quarter of 2025, averaging about 14 percent for the year, down sharply from 28.3 percent in 2024.
Inflation is forecast to decline further in 2026 and approach the CBE’s target by the fourth quarter, although the pace of disinflation may be constrained by sticky non-food inflation, fiscal consolidation measures and global geopolitical risks.
The MPC said it would continue to calibrate the pace of monetary easing based on incoming data and inflation risks, reaffirming its commitment to steering inflation toward its medium-term target of 7 percent, plus or minus two percentage points, by the end of 2026.
