The Central Bank of Egypt (CBE) expects headline inflation to decline to between 14% and 15% in 2025, after slowing to 15.2% in the second quarter compared with 16.5% in the first. The projection was announced following the latest meeting of the Monetary Policy Committee (MPC), which cut key interest rates by two percentage points in a move intended to support the disinflationary trend.
The overnight deposit rate was lowered to 22%, the overnight lending rate to 23%, while both the main operation rate and the credit and discount rate were set at 22.5%. The MPC explained that the decision reflected its assessment of recent inflation developments and expectations, building on signs of easing pressures across the domestic economy.
Globally, recent months have seen a gradual recovery in growth alongside stabilising inflation expectations. This has encouraged central banks in advanced and emerging markets to ease monetary policy, albeit cautiously, given continuing uncertainty. Commodity markets remain mixed, with oil prices fluctuating due to supply dynamics, while agricultural prices have followed divergent paths. Despite these developments, risks to global growth and inflation persist, particularly from geopolitical tensions and disruptions to trade policy.
Domestically, preliminary CBE data suggest stronger-than-expected economic growth in the second quarter of 2025, supported mainly by non-oil manufacturing and tourism. Real GDP is now projected to expand by 5.4% in the quarter, with the fiscal year 2024/2025 expected to record average growth of 4.5%, compared with 2.4% in 2023/2024. Labour market conditions also improved, with unemployment falling to 6.1% in the second quarter, down from 6.3% in the first.
Inflation data show further signs of relief. Annual headline inflation slowed to 13.9% in July 2025, from 14.9% in June, while core inflation was broadly stable at 11.6% compared with 11.4% a month earlier. On a monthly basis, both headline and core inflation recorded negative rates in July, at -0.5% and -0.3% respectively, marking a second consecutive month of contraction. These negative monthly readings underline the easing of inflationary pressures and point to improved expectations, supported by monetary policy and more stable exchange rate conditions.
The CBE therefore expects inflation to average between 14% and 15% over the course of 2025, before gradually approaching its target range. According to the outlook, inflation is forecast to converge towards the CBE’s target of 7% (±2%) by the fourth quarter of 2026, and further towards 5% (±2%) by the fourth quarter of 2028.
Nevertheless, the MPC cautioned that the inflation path remains exposed to several upside risks. Chief among these are the possibility of administered price adjustments exceeding expectations, as well as heightened geopolitical tensions that could disrupt global supply chains and commodity markets.
Against this backdrop, the Committee judged that cutting policy rates by 200 basis points was appropriate to maintain a monetary stance that anchors expectations and supports the anticipated decline in inflation. The MPC stressed that future policy decisions will continue to be data-dependent, taken on a meeting-by-meeting basis, and guided by inflation expectations, risk assessments, and domestic and external developments.
The Committee reaffirmed its commitment to closely monitor economic and financial conditions and to deploy all available instruments to safeguard price stability.
