The Central Bank of Egypt (CBE) has cautioned that persistent inflation-related risks necessitate a prudent approach to the ongoing monetary easing cycle.
During its meeting last Thursday, the Monetary Policy Committee (MPC) decided to keep the CBE’s key policy rates unchanged — maintaining the overnight deposit rate at 21%, the overnight lending rate at 22%, and both the main operation rate and the credit and discount rate at 21.5%. These rates represent the main benchmark for short-term interest movements on the Egyptian pound.
The decision was widely anticipated by economists and investment banks.
So far this year, the CBE has cut interest rates by a cumulative 6.25%, with reductions of 2.25% in April, 1% in May, 2% in August and 1% in October.
In its accompanying statement, the MPC said the decision reflects its assessment of the latest inflation data and expectations since its previous meeting.
Globally, the Committee noted that indicators point to a continued recovery in economic activity, although global forecasts remain clouded by uncertainty over trade policies and persistent geopolitical tensions. Against this backdrop, central banks in advanced and emerging economies have generally taken a cautious stance in easing monetary policy.
On commodity markets, it said oil prices have been broadly stable, while many agricultural commodity prices have retreated. Nonetheless, upside risks to inflation remain, particularly the possibility of renewed disruptions to global supply chains.
Domestically, the MPC said the CBE’s estimates point to a slight improvement in economic growth, with real GDP expanding by 5.2% in the third quarter (Q3) 2025 compared with 5.0% in Q2. This acceleration was supported by strong performance in non-oil manufacturing, trade and tourism. The Committee added that output is expected to continue approaching full capacity, which is anticipated to be reached by the end of fiscal year 2025/2026.
Unemployment rose marginally to 6.4% in Q3 2025, from 6.1% in the previous quarter.
Regarding inflation, the MPC reported that the annual headline inflation rate increased to 12.5% in October 2025 from 11.7% in September. Core inflation also rose, reaching 12.1% in October compared with 11.3% a month earlier. It added that monthly inflation deviated from its typical seasonal pattern due to higher non-food prices — particularly services — which offset the impact of slowing food inflation.
The Committee stressed that further moderation in monthly inflation dynamics is needed for headline inflation to converge toward the CBE’s target.
It added that inflation expectations remain exposed to both global and domestic upside risks, including any escalation in geopolitical tensions, the persistence of services inflation, and fiscal consolidation measures that may exceed earlier projections.
Given these risks, the MPC said it must closely monitor inflation developments and their implications for the outlook, underscoring the need for caution in the monetary easing cycle.
The Committee said it therefore opted for a wait-and-see approach by holding policy rates steady, viewing this stance as appropriate for containing inflationary pressures, anchoring expectations and returning inflation to its downward path.
It reiterated that it will continue to assess its policy decisions on a meeting-by-meeting basis, guided by expectations, risk assessments and incoming data. The CBE added that it stands ready to deploy all available tools to achieve price stability and steer inflation toward its target of 7% (± 2%) on average in Q4 2026.
