The MPC reduced the overnight deposit rate to 20 percent, the overnight lending rate to 21 percent, and the rate of the main operation to 20.5 percent. The discount rate was also cut by one percent (100 basis points) to 20.50 percent, the CBE said in a statement following the meeting.
The decision reflects the committee’s assessment of inflation dynamics and economic developments since its previous meeting.
At the global level, economic growth has remained relatively resilient, though the outlook continues to be clouded by trade uncertainty, persistent geopolitical tensions, and slowing demand. Inflation trends have been broadly stable, with central banks in advanced and emerging markets alike adopting a cautious approach to gradual monetary easing. Oil prices have moderated as global supply exceeded demand, while agricultural commodity prices showed mixed trends, amid lingering risks related to supply-chain disruptions and geopolitical developments.
Domestically, the CBE’s nowcast for the fourth quarter of 2025 points to a slight moderation in economic growth, with real GDP growth expected to hover around 5.0 percent, compared to 5.3 percent in the previous quarter. Growth in the third quarter of 2025 was mainly driven by non-petroleum manufacturing, trade, and communications. Despite the slowdown, the current output trajectory is expected to support the short-term disinflation path, with demand-side inflationary pressures remaining contained under the prevailing monetary stance.
Annual headline inflation resumed its downward trend in November 2025, falling to 12.3 percent despite recent fuel price adjustments. The decline was largely driven by a sharp drop in food inflation, which fell to 0.7 percent — its lowest level in more than four years. Annual core inflation stood at 12.5 percent in November, driven mainly by non-food items, particularly services. Every month, headline and core inflation registered 0.3 percent and 0.8 percent, respectively, both below their historical seasonal averages, pointing to improving inflation expectations and a gradual fading of the impact of earlier shocks.
Against this backdrop, the CBE expects headline inflation to stabilize near current levels in the fourth quarter of 2025, with the annual average projected at around 14.0 percent for 2025, down from 28.3 percent in 2024. Inflation is forecast to decline further in 2026, converging toward the CBE’s target range by the fourth quarter of that year. However, the disinflation path remains constrained by persistent non-food inflation, the impact of fiscal measures, and ongoing global geopolitical risks.
In light of these developments, the MPC said the 100-basis-point rate cut is consistent with maintaining a monetary stance that anchors inflation expectations while supporting the disinflation trajectory. The committee stressed that future decisions on the pace and magnitude of monetary easing will be guided by incoming data, inflation forecasts, and the balance of risks.
The MPC reaffirmed its readiness to adjust its policy tools as needed to achieve price stability and steer inflation toward the CBE’s target of 7 percent, plus or minus 2 percentage points, on average by the fourth quarter of 2026.
Short link: