The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) is set to hold its final meeting of 2025 on Thursday, amid strong market expectations that it will cut key policy interest rates.
The MPC will decide on the fate of the CBE’s benchmark rates, which guide short-term interest-rate movements on the Egyptian pound. At its previous meeting on 20 November, the Committee opted to keep rates unchanged at 21% for deposits, 22% for lending, and 21.5% for both the credit and discount rate and the main operation rate. This decision followed cumulative cuts of around 6.25% earlier in the year, implemented in four stages: 2.25% in April, 1% in May, 2% in August, and 1% in October.
Inflation developments
Explaining its November decision, the MPC said it was based on its assessment of inflation developments and the outlook since the previous meeting in October.
The Committee noted that inflation expectations remain exposed to upside risks, both globally and domestically. These include the potential escalation of geopolitical tensions, the relative persistence of services inflation, and fiscal consolidation measures exceeding expectations. It stressed that such risks require close monitoring of inflation trends and their implications over the forecast horizon, warranting a cautious approach to monetary easing.
The MPC added that it had adopted a wait-and-see approach by keeping policy rates unchanged, considering this stance appropriate for containing inflationary pressures, anchoring expectations, and reinforcing the downward trajectory of inflation.
The Committee reiterated that monetary policy decisions will continue to be assessed on a meeting-by-meeting basis, depending on the evolving outlook, associated risks, and incoming data. It reaffirmed its commitment to achieving price stability by steering inflation towards its target of 7% (± 2%) on average in the fourth quarter of 2026, stressing that it would not hesitate to use all available tools to meet this objective.
Earlier this month, the CBE reported that core inflation rose to 12.5% in November 2025, up from 12.1% in October, while the monthly core consumer price index increased by 0.8%, compared with 2% a month earlier.
Meanwhile, the monthly change in the headline consumer price index for urban areas, as reported by the Central Agency for Public Mobilisation and Statistics, stood at 0.3% in November, down from 1.8% in October. Annual headline inflation in urban areas eased to 12.3% from 12.5%.
Expectations of investment banks and experts
A number of investment banks–including EFG Hermes, Al-Naeem, Al-Ahly Pharos, Mubasher Financial, Cairo Capital, Arabia Online and Thndr–have forecast an interest-rate cut of between 50 and 100 basis points at Thursday’s meeting.
A Reuters poll of 14 economists also showed expectations that the CBE would cut its key policy rates by 100 basis points, citing the slight slowdown in inflation in November.
Prominent banking expert Mohamed Abdel Aal expects the MPC to prioritise economic growth and resume the easing cycle by cutting interest rates by between 100 and 200 basis points at its final meeting of the year.
Abdel Aal said several factors underpin this view, foremost among them the CBE’s target of bringing average inflation down to 7% (± 2%) by the end of 2026. Achieving this, he argued, would require the nominal policy rate to fall to around 13-15%. With the current average policy rate standing at about 21.25%, the MPC would need to cut rates by 600-800 basis points over the medium term, justifying a faster pace of easing starting from the upcoming meeting.
He added that the US Federal Reserve’s ongoing rate cuts help preserve an attractive interest-rate differential between the Egyptian pound and the US dollar, even if Egypt eases policy. This, he said, gives the CBE sufficient room to lower rates and stimulate growth without risking a sharp decline in foreign portfolio inflows.
Real interest rate
According to Abdel Aal, Egypt’s real interest rate remains high at around 8.75%, a contractionary level that constrains growth. Reducing rates would help lower borrowing costs for businesses and households, encourage investment and spending, and support economic expansion at a time of relative inflation stability.
He also highlighted the fiscal impact, noting that every 1% cut in interest rates reduces government debt-servicing costs by around EGP 70bn, easing pressure on the state budget.
Abdel Aal further pointed to the relative stability–and recent strength–of the Egyptian pound against the US dollar, which lowers the cost of imported inputs and finished goods. This “imported inflation mitigation”, he said, gives producers room to absorb cost increases rather than passing them fully on to consumers.
He added that while rate cuts do not yield immediate effects, they gradually reduce financing costs, allowing companies either to cut prices to enhance competitiveness or absorb higher energy costs, thereby supporting growth through lower credit burdens.
Taken together, Abdel Aal concluded, the objectives of supporting growth, avoiding economic stagnation, and easing the public debt burden tilt the balance in favour of a 200-basis-point rate cut at Thursday’s MPC meeting.
Egypt’s external position
Meanwhile, HC Securities and Investment expects the CBE to cut interest rates by 150 basis points.
Heba Mounir, the firm’s macroeconomic analyst, said Egypt’s external position has shown resilience, with net international reserves rising by 0.29% month-on-month and by around 7% since the start of the year to a record $50.2bn in November.
She noted that net foreign assets in the banking sector increased by around 9% month-on-month to $22.7bn in October, while remittances from Egyptians abroad rose by 26% year-on-year to $3.7bn. In addition, Egypt’s one-year credit default swap spread fell sharply to 138 basis points, and Suez Canal revenues increased by about 17% year-on-year during the first five months of the current fiscal year.
“These factors contributed to a roughly 7% appreciation of the Egyptian pound against the dollar since the beginning of the year,” Mounir said.
On the domestic front, she added, the Purchasing Managers’ Index reached 51.1 points in November–its highest level since October 2020–supported by stronger demand and easing cost pressures.
HC expects inflation to continue its gradual decline due to base effects and believes current Treasury bill yields remain attractive for foreign investors, offering a real return of about 10.5% after tax, based on a forecast of 11% average inflation over the next 12 months.
The firm added that the decline in Egypt’s CDS spread is likely to contribute to further reductions in the yields demanded by investors.
“Based on improvements in Egypt’s external position, the exchange rate, and easing inflation, we expect the MPC to cut interest rates by 150 basis points at its 25 December meeting to stimulate private-sector growth,” HC said.
Egyptian monetary policy management
Banking expert Shaimaa Wagih also expects an interest-rate cut at the CBE’s final meeting of 2025, describing the decision as a strategic turning point in Egypt’s monetary policy management.
She said the move would reflect a balanced approach that supports economic activity while safeguarding financial-market stability, noting improvements in inflation indicators and liquidity conditions.
“A rate cut reflects a clear and well-calibrated economic vision,” Wagih said, citing lower borrowing costs, stronger investment, enhanced purchasing power, improved liquidity, and stronger aggregate demand as key benefits.
She added that such a decision would positively affect the banking sector and capital markets by lowering financing costs, encouraging productive investment, and supporting banks’ ability to diversify loan portfolios and improve returns.
According to Wagih, the expected move underscores the CBE’s precise and balanced monetary management, taking into account inflation control, exchange-rate stability and liquidity conditions in a way that strengthens the resilience of the financial system.
She concluded that a rate cut at Thursday’s meeting would represent a carefully calculated step aimed at stimulating growth and domestic investment while preserving monetary and financial stability, reinforcing confidence in Egypt’s economic management.
