The Central Bank of Egypt (CBE) said a 1% cut in interest rates is appropriate to maintain a monetary policy stance that anchors inflation expectations and supports the continued downward trajectory of inflation.
On Thursday evening, the Monetary Policy Committee (MPC) decided to cut the Bank’s key policy rates—which serve as the main benchmark for short-term interest-rate movements on the Egyptian pound—by 1%, bringing them to 20% for overnight deposits, 21% for overnight lending, and 20.5% for both the main operation rate and the credit and discount rate.
The MPC said the decision reflects its assessment of inflation developments and the inflation outlook since its previous meeting on 20 November.
At the global level, the Committee noted that economic growth has continued its relative recovery, although the outlook remains clouded by uncertainty surrounding trade policies, ongoing geopolitical tensions and slower growth in global demand.
Inflation dynamics globally have remained broadly stable, with central banks in both advanced and emerging economies continuing to adopt a cautious approach to monetary easing through gradual policy adjustments.
In global commodity markets, oil prices declined as global supply outpaced demand, while agricultural commodity prices recorded mixed movements. Nevertheless, the Committee warned that risks remain elevated, particularly given the potential for supply-chain disruptions and escalating geopolitical tensions.
Domestically, the MPC said the CBE’s estimates point to real GDP growth of around 5% in the fourth quarter of 2025, compared with 5.3% in the third quarter. Growth in Q3 was mainly driven by positive contributions from non-oil manufacturing, trade and communications sectors.
Despite the continuation of economic growth, the Committee said the current output path is expected to support the anticipated short-term decline in inflation, as demand-side inflationary pressures are likely to remain contained under the prevailing monetary policy stance.
On inflation developments, the MPC noted that annual headline inflation resumed its downward trend, reaching 12.3% in November 2025, despite the recent increase in fuel prices.
This decline was largely driven by a sharp fall in annual food inflation, which dropped to 0.7%, its lowest level in more than four years. Annual core inflation, meanwhile, stood at 12.5%, reflecting higher prices of non-food items, particularly services.
On a monthly basis, headline and core inflation recorded 0.3% and 0.8%, respectively, in November. The moderation in recent monthly inflation readings compared with typical seasonal patterns indicates an improvement in inflation expectations and the gradual fading of the effects of previous shocks, the Committee said.
Looking ahead, the CBE’s forecasts indicate that annual headline inflation will stabilise near its current levels in the fourth quarter of 2025, averaging around 14% for the year as a whole, compared with 28.3% in 2024.
In 2026, inflation is expected to decline further and approach the Bank’s target by the fourth quarter of the year. However, the pace of disinflation remains constrained by the slow easing of non-food inflation and the impact of fiscal consolidation measures, while global geopolitical tensions continue to pose upside risks to inflation expectations.
The MPC reaffirmed that it will continue to assess its decisions regarding the pace of monetary easing based on the inflation outlook, surrounding risks and incoming data. It said it will closely monitor economic and financial developments and will not hesitate to use all available tools to achieve price stability by steering inflation towards its target of 7% (±2%) on average in the fourth quarter of 2026.
