The Central Bank of Egypt decided to keep its overnight interest rates unchanged on Thursday in an effort to control the rise in inflation as the economy heads towards full capacity. The monetary policy committee opted to maintain the deposit rate at 21% and the lending rate at 22%. Analysts were split on expectations, with a Reuters poll suggesting a potential cut of 100 basis points, but the median projection leaned towards a 50-point reduction. Despite previous rate cuts earlier in the year, Egypt still has some of the highest real interest rates globally.
The central bank reported a slight increase in real GDP growth to 5.2% in the third quarter of 2025 from 5.0% in the previous quarter. This growth was predominantly fueled by non-petroleum manufacturing, trade, and tourism. The Monetary Policy Committee stated that the economy is moving closer to full capacity utilization, a target expected to be met by the end of the fiscal year 2025/26 ending on June 30th. Inflationary pressures were evident in the economy, with headline inflation rising to 12.5% in October and core inflation climbing to 12.1% from the previous month. The committee anticipated a further increase in headline inflation due to energy price hikes, followed by a gradual decline towards the second half of 2026, aligning with the Central Bank’s target range of 5% to 9%.
The uptick in inflation was attributed to a rise in state-regulated fuel prices and changes in rental laws allowing landlords to raise rents rapidly. In light of these factors, the committee chose to maintain the current policy rates to curb inflation, stabilize expectations, and return to a path of disinflation. The decision reflects a cautious approach towards managing economic conditions while aiming for sustainable growth and price stability. As Egypt navigates through economic challenges and inflationary pressures, the Central Bank remains vigilant in its efforts to support a balanced and resilient financial system for the country’s long-term prosperity.
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