CBE Cuts Interest Rates by 100 Basis-point amid Positive Inflation Outlook

The Central Bank of Egypt (CBE) has slashed its key interest rates by 100 basis points, signaling renewed confidence in the country’s macroeconomic trajectory and a marked improvement in inflationary trends.

In a statement released following Thursday’s Monetary Policy Committee (MPC) meeting, the CBE announced the overnight deposit and lending rates were cut to 21% and 22%, respectively, with the main operation rate now at 21.5%. The discount rate also saw a similar 100-point reduction to 21.5%.

The move marks a pivotal turn in Egypt’s monetary policy stance, which had remained aggressively tight for months to combat soaring inflation triggered by a combination of global commodity shocks, currency pressures, and fiscal adjustments.

The CBE now sees signs of relief as annual headline inflation dropped to 12% in August, down from 13.9% in July, while core inflation also slowed to 10.7%, from 11.6% the month prior. The central bank attributed this to a broad-based easing in food prices and relative stability in non-food categories.

“Recent monthly developments confirm a sustained slowdown in inflationary momentum,” the CBE said, noting that food deflation and fading impacts of previous supply shocks are driving the trend.

The central bank projects inflation to average between 12%–13% in Q3 2025, down from 15.2% in Q2. It expects annual inflation to hover around 14% for the full year, steadily approaching the target range of 7% ±2% by Q4 2026.

On the growth front, Egypt’s real GDP accelerated to 5% in Q2 2025, up from 4.8% in Q1. Full-year growth for FY2024/25 averaged 4.4%, nearly doubling from 2.4% the previous year. Key sectors like manufacturing (excluding petroleum), tourism, and trade were the primary drivers of this rebound.

Despite this progress, the central bank acknowledged that GDP remains below full capacity, suggesting that the economy still has room to expand without reigniting demand-driven inflation.

The rate cut also aligns with a global trend toward gradual monetary easing, as inflation expectations stabilize in both advanced and emerging economies. Nevertheless, the CBE warned that risks remain, including geopolitical tensions, global trade uncertainty, and potential adjustments in administratively-set domestic prices.

“Inflation expectations remain vulnerable to upside risks, both locally and internationally,” the statement emphasized.