Egypt: Central Bank of Egypt decreases rates in December
CBE resumes loosening cycle: At its meeting on 25 December, the Central Bank of Egypt (CBE) decided to cut the overnight deposit, overnight lending and main operations rates by 100 basis points to 20.00%, 21.00% and 20.50%, respectively. The cut largely took market analysts by surprise, as another hold had been anticipated. The reduction brought total cuts to 725 basis points in April–December.
Headline inflation resumes downward trajectory: The key domestic factor was headline inflation resuming its downward trend in November, as food inflation eased to an over four-year low. The CBE noted these dynamics revealed an improvement in inflation expectations plus the fading impact of prior shocks. The Bank expects inflation to wane toward its 5.0–9.0% target by October–December 2026; that said, the slowdown will lose steam due to fiscal measures, while geopolitical tensions remain a key upside risk.
Regarding activity, the CBE expects GDP growth to have moderated to around 5% in October–December 2025 from the prior three months’ 5.3% rise, providing additional impetus for an interest rate cut to boost economic activity.
More cuts in 2026: The CBE did not provide explicit forward guidance on future interest rate movements. All of our panelists expect the CBE to reduce rates further in 2026, with a 300–900 basis point spread. The CBE will reconvene on 12 February.