The announcement was made following the MPC meeting held on Thursday to review the key interest rates. It also follows a regular press briefing held a few hours ago in which the International Monetary Fund (IMF) reaffirmed its support for the Egyptian economy amid the ongoing challenges.
As of today's decision, the overnight deposit rate was lowered to 24 percent, the overnight lending rate to 25 percent, and the main operation rate to 24.50 percent. Additionally, the discount rate has also been cut to 24.50 percent. The decision reflects an updated assessment of both global and domestic economic conditions since the MPC's last meeting in April.
This is the second cut the CBE has introduced since the start of 2025. The last slash the CBE applied was during the MPC's April meeting.
Global economic context
Globally, the CBE noted that economic growth prospects have softened due to ongoing trade policy uncertainties and risks of further supply chain disruptions. In response, many central banks in advanced and emerging markets have adopted a cautious stance on monetary policy.
Meanwhile, supply-side issues and waning demand continue to influence global commodity prices. Oil prices, in particular, remain volatile, while agricultural commodities have seen only modest declines due to climate-related risks. Though inflationary pressures are receding globally, risks persist, particularly those linked to geopolitical tensions and trade policy shifts.
Domestic economic developments
Domestically, the CBE's forecasts for the first quarter (1Q) of 2025 indicate a robust recovery, with real GDP growth projected at five percent, up from 4.3 percent in the fourth quarter of 2024. However, output gap estimates reveal that real GDP is still below its potential, pointing to subdued demand-side inflationary pressures, a key consideration in today's rate cut.
The unemployment rate showed a slight improvement, declining to 6.3 percent in 1Q 2025 from 6.4 percent in the previous quarter, which reflects steady gains in labour market conditions.
Inflation dynamics and monetary policy outlook
The most notable improvement is in inflation. According to the statement, the CBE noted that annual headline inflation slowed to 13.9 percent in April 2025, while core inflation settled at 10.4 percent. The CBE attributed this deceleration to its prior monetary tightening, favourable base effects, declining food prices, and the waning impact of past economic shocks.
Though non-food inflation remains elevated due to administered price adjustments, the overall underlying inflation trend is declining, reinforcing confidence in the CBE's inflation target of seven percent ( ± two percent by 4Q of 2026).
The CBE projected the country's inflation to continue a gradual downward trajectory throughout 2025 and 2026. However, ongoing fiscal consolidation efforts and relatively persistent non-food inflation may moderate the pace of the decline.
Risks and policy strategy
The CBE acknowledged that upside risks to inflation have moderated since April, citing reduced trade tensions, stabilised exchange rates, and normalising sovereign risk levels.
Still, the committee remains cautious of external uncertainties, such as regional conflicts and the potential for greater-than-expected pass-through of fiscal measures to domestic prices.
In light of these developments, the MPC judged that a 100 basis point rate cut balances the need to guard against residual risks while advancing the ongoing monetary easing cycle, which aims to support disinflation and overall economic recovery.
The MPC reiterated its commitment to a data-dependent policy approach, stating that it will continue to evaluate the magnitude and pace of future rate adjustments on a meeting-by-meeting basis. The central bank reaffirmed its mandate to ensure price stability. It emphasised readiness to use all available tools to guide inflation toward its medium-term target.
It is worth noting that an IMF mission is currently in Egypt for the final discussions of the fifth review of the ongoing $8 billion Extended Fund Facility (EFF) loan programme.
Short link: