Egypt’s Central Bank Cuts Inflation Forecast to 14% in Q4

The Central Bank of Egypt (CBE) revised its inflation outlook downward on Thursday, forecasting an average inflation rate of 14% for Q4 2025, compared to an earlier estimate of 15%, as price pressures continue to ease and the economy shows signs of stable recovery.

The revised forecast came alongside a 1% interest rate cut, the fourth such move in 2025 and the second in succession, bringing the deposit rate to 21% and the lending rate to 22%. The decision reflects growing confidence that Egypt’s inflationary wave is subsiding, aided by cooling food prices and improving market expectations.

“The broad-based monthly decline in inflation over the past three months reflects improved inflation expectations and the gradual dissipation of previous supply shocks,” the central bank said in a statement following its Monetary Policy Committee (MPC) meeting.

Egypt’s annual urban inflation rate dropped to 12% in August, down from 13.9% in July, marking its lowest level in more than three years. The decline was largely attributed to falling prices in key food groups, aligning with government projections for reduced cost pressures in the second half of the year.

The central bank expects inflation to hover between 12% and 13% in Q3 2025, with a longer-term goal of bringing it down to a target range of 5% to 9% by Q4 2026, and further narrowing to 3% to 7% by Q4 2028.

However, the CBE cautioned that inflation remains vulnerable to upside risks, including domestic price adjustments and regional geopolitical tensions.

Despite the recent economic rebound, the central bank stated that domestic demand-side pressures remain limited, supporting its decision to maintain a relatively tight, yet responsive, monetary stance.

“Real GDP growth has accelerated, but remains below potential, suggesting continued downward pressure on inflation in the short term,” the bank said.

Egypt's real GDP growth rate surged to 5% in the second quarter of 2025, up from 4.8% in Q1, buoyed by strong performance in the non-oil manufacturing, tourism, and trade sectors.

On an annual basis, average GDP growth reached 4.4% in fiscal year 2024/25, almost doubling from 2.4% in 2023/2024, signaling a broader recovery across key sectors.