Egypt Central Bank Cuts Key Interest Rates by 100 BPS

Egypt’s central bank announced a significant shift in its monetary stance on Thursday, unveiling a reduction in key overnight interest rates as part of its latest policy decision.

Details of the Rate Adjustment

Following the meeting of its monetary policy committee, the overnight deposit rate was lowered to 20 percent, while the overnight lending rate was reduced to 21 percent, each reflecting a cut of one full percentage point from their previous levels.

Economic Growth Outlook for Late 2025

The central bank expects Egypt’s real gross domestic product to expand at a pace of about 5 percent in the fourth quarter of 2025, slightly softer than the 5.3 percent recorded in the preceding quarter. Growth momentum earlier in the year was driven largely by strong performances in non-oil manufacturing, trade activities, and the communications sector.

Market Expectations and Inflation Trends

The decision closely mirrors market expectations, aligning with a Reuters survey released earlier in the week that anticipated a one-percentage-point reduction in rates. Analysts pointed to easing inflationary pressures observed in November as a key factor supporting the move.

Inflation Forecast for 2025

Headline inflation is projected to remain broadly stable in the final quarter of 2025, averaging close to 14 percent over the year. This would mark a sharp improvement compared with the 28.3 percent inflation rate recorded the previous year.

Recent Inflation Developments

Official data showed that annual urban consumer inflation eased to 12.3 percent in November. At the same time, core inflation, which excludes volatile components such as food and energy, climbed to 12.5 percent year on year, up from 12.1 percent in October.

Long-Term Inflation Targets and Risks

Looking ahead, the central bank reaffirmed its aim to bring inflation to around 7 percent, with a margin of plus or minus two percentage points, by the fourth quarter of 2026. However, policymakers cautioned that lingering pressures from non-food prices and the effects of fiscal policy measures could pose challenges to achieving this goal.