The Central Bank of Egypt building in the new Administrative capital. Photo courtesy of FEB website.
Following the decision, the overnight deposit rate was reduced to 19 percent, the overnight lending rate to 20 percent, and the main operation rate to 19.5 percent. The discount rate was also cut to 19.5 percent.
The MPC said the move reflects its assessment of declining inflationary pressures and the evolving economic outlook since its previous meeting.
At the global level, the committee noted that economic growth remains relatively resilient, supported by accommodative financial conditions, although risks persist from geopolitical tensions, trade policy uncertainty, and moderating demand in major economies. Inflation has remained broadly contained across advanced and emerging markets, prompting most central banks to adopt a cautious approach to monetary easing.
Domestically, the CBE’s updated nowcast points to a slight moderation in growth in the fourth quarter of 2025, with real GDP expected to grow by around 4.9 percent, down from 5.3 percent in the previous quarter. Growth was supported mainly by non-petroleum manufacturing, tourism, and communications. The CBE expects real GDP growth to average 5.1 percent in FY 2025/2026, up from 4.4 percent a year earlier.
Inflation continued its downward trend, with annual headline and core inflation easing to 11.9 percent and 11.2 percent, respectively, in January 2026, compared with 12.3 percent and 11.8 percent in December 2025. Average headline and core inflation fell sharply in 2025 to 14.1 percent and 12.1 percent, from 28.3 percent and 27.2 percent in 2024.
The MPC said the slowdown was driven largely by lower food inflation, which reached its lowest level in four years, alongside a more gradual easing in non-food inflation supported by subdued demand, recent exchange rate appreciation, and improved inflation expectations.
Looking ahead, the CBE expects headline inflation to remain broadly stable in the first quarter of 2026 before resuming its downward trajectory later in the year, with inflation projected to reach the bank’s target of 7 percent (±2 percentage points) on average by the fourth quarter of 2026. However, the committee warned that risks remain, including potential spillovers from fiscal measures and renewed geopolitical tensions.
The MPC said the 100-basis-point rate cut, together with the two-percentage-point reduction in the reserve requirement, is intended to support monetary policy transmission and maintain liquidity conditions consistent with the inflation target. Future policy decisions will depend on inflation developments, incoming data, and the balance of risks.
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