Egypt Unexpectedly Leaves Monetary Policy Unchanged

The Central Bank of Egypt lowered key interest rates by 100 bps on Thursday, 25 December 2025, signaling growing confidence that inflationary pressures are easing after a prolonged period of tight monetary policy, bringing rates to their lowest level since January 2024. The latest data showed annual urban inflation eased to 12.3% in November, down from October’s three-month high of 12.5%, mainly driven by softer increases in food prices (0.7% vs 1.5% in October), the lowest since April 2021. The central bank targets inflation of around 5–9% in Q4 2026, while expecting real GDP growth to reach around 5%. The Monetary Policy Committee also slashed the overnight deposit rate to 20.0%, the overnight lending rate to 21.0%, and the main operation rate to 20.50%, while the discount rate was reduced to 20.50%. Egypt has maintained elevated borrowing costs for much of the past two years as it sought to rein in inflation driven by currency devaluations, supply shocks, and fiscal pressures.

The Central Bank of Egypt kept its overnight deposit rate steady at 21% at its November 2025 meeting, pausing after four consecutive cuts to curb inflationary pressures, anchor expectations, and restore the disinflation path. Analysts had anticipated a 50 bps rate cut to 20.5%. Policymakers noted that annual headline inflation accelerated to 12.5% in October 2025 from 11.7% in September, and that core inflation rose to 12.1% from 11.3% in the previous month. Inflation is projected to inch up as the impact of energy price increases takes hold toward the end of Q4 2025, before gradually declining in H2 2026 toward the CBE target. The Committee also decided to keep the overnight lending rate at 22% and the discount rate unchanged at 21.5%.

The Central Bank of Egypt cut its overnight deposit rate by 100bps to 21% in their October 2025 meeting, the fourth reduction this year, and loosely aligned with expectations of a slash that ranged between a cut of 100bps and 200bps. The move added to a cumulative 525bps in rate cuts in 2025, with the Egyptian pound's recent strength adding room for the central bank to lower rates and ease pressures on growth and soaring levels on interest payments by the central government. The official exchange rate for the pound held its rebound from this year to hold below 48 per USD, aligned with the devaluation from early 2024. The cut is expected to mark the end of the current easing cycle for the CBE as the central government is due to hike fuel prices later this month as part of reforms backed by the IMF, risking some traction in inflation.