CBE Lowers Policy Rates by 200 Basis Points as Inflation Pressures Ease

The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) today decided to cut the CBE’s overnight deposit rate, overnight lending rate, and the rate of the main operation by 200 basis points to 22.00 percent, 23.00 percent, and 22.50 percent, respectively.

The Committee also decided to cut the discount rate to 22.50 percent. This decision reflects the Committee’s updated assessment of inflation dynamics and outlook since the previous MPC meeting.   

Globally, growth has shown signs of recovery and inflation expectations remained broadly stable.

Against this backdrop, central banks in both advanced and emerging market economies continued to ease their monetary policies, albeit gradually given current uncertainties.

Regarding commodity prices, oil experienced slight volatility due to supply dynamics, while agricultural commodity prices witnessed divergent dynamics. Nevertheless, global growth and inflation remain subject to risks, particularly the possibility of escalating geopolitical tensions and further trade policy disruption.

Domestically, the CBE nowcast for Q2 2025 signals a faster growth outturn than previously expected, driven by the positive contributions of non-petroleum manufacturing and tourism.

Accordingly, CBE projections suggest that real economic activity has expanded by 5.4 percent in Q2 2025, averaging 4.5 percent in FY 2024/25, compared to 2.4 percent in FY 2023/24.

Nevertheless, estimates indicate that demand-side inflationary pressures are projected to remain contained, supported by the prevailing monetary stance and consistent with the forecasted disinflation trajectory over the short run. With respect to the job market, the unemployment rate declined to 6.1 percent in Q2 2025 from 6.3 percent in Q1 2025.   

In terms of inflation outturns, annual headline inflation decelerated to 13.9 percent in July 2025, down from 14.9 percent in June 2025. Meanwhile, core inflation remained almost stable at 11.6 percent in July 2025 compared to 11.4 percent in June 2025.

On a monthly basis, headline and core inflation registered negative 0.5 percent and negative 0.3 percent in July 2025, respectively. The monthly deflation over the past two months reflects a broader downward trend, supported by broad-based easing in price dynamics and a sufficiently tight monetary stance, which suggests an improvement in inflation expectations. 

In line with inflation slowing to 15.2 percent in Q2 2025 from 16.5 percent in the prior quarter, CBE forecasts suggest it will continue to ease, with an average ranging between 14 percent and 15 percent in 2025.

These favorable outcomes—alongside improving underlying dynamics relative to previous months, and more supportive exchange rate developments—have created room for a measured resumption of monetary easing.

Accordingly, inflation is projected to continue its downward trajectory over the forecasted horizon, converging towards the CBE target range by Q4 2026. Nonetheless, the inflation outlook remains susceptible to domestic and global upside risks. These include the possibility of a higher-than-anticipated passthrough of administered price changes to domestic prices, as well as escalating geopolitical tensions in the region.

In view of the above, the MPC has judged that a 200 basis points reduction in policy rates aligns with maintaining a conducive monetary stance, with the aim of anchoring inflation expectations and sustaining the disinflation path.

Going forward, the Committee will re-assess the scale and pace of monetary easing on a meeting-by-meeting basis, guided by the forecast trajectory, incoming data and the prevailing balance of risks.

The MPC will continue to closely monitor economic and financial developments, and stands ready to adjust its policy instruments as needed to fulfil its price stability mandate, steering inflation towards its targets of 7 percent (± 2 p.p.) in Q4 2026 and 5 percent (± 2 p.p.) in Q4 2028, on average.