The committee also decided to keep the discount rate unchanged at 24.5 per cent. According to a statement by the MPC, maintaining policy rates at their current level is appropriate for supporting the disinflation path.
Ahead of last Thursday’s meeting, experts had differed on which path they expected the MPC to take. Some predicted it would continue with the monetary easing policy it began in April because inflation had lately been cooling. Annual urban inflation recorded 14.9 per cent in June 2025, compared to 16.8 per cent in May 2025 according to the Central Agency for Public Mobilisation and Statistics. Others felt that, considering possible domestic inflationary pressures and geopolitical tensions, the CBE would adopt a more cautious approach.
In fact, as per the MPC statement, “a wait-and-see approach is required before proceeding further with the monetary easing cycle, especially that this approach would allow time to gauge the possible effects of recently announced legislative amendments, such as value-added tax reforms.” The new tax amendments being referred to, which recently went into effect, include new VAT treatment for some businesses, including construction, cigarettes and tobacco.
The Central Bank is also cautious about global economic conditions, including trade policy uncertainty, geopolitical tensions, and potential disruptions in trade flows, since these factors could affect the economy’s growth and inflation outlook. Keeping interest rates steady helps anchor inflation expectations and prevents demand-side pressures. Some experts felt that keeping the rates unchanged was important because it would avoid negatively impacting foreign cash flows in debt instruments. These foreign cash flows help stabilise the value of the pound against the dollar and provide liquidity, enabling the government to finance its activities and meet its financial obligations.
However, others believe stimulating investment and manufacture and creating jobs is more important to boost the GDP growth rate. Egypt’s GDP growth rate has been picking up speed, accelerating to around 4.7 per cent in the third quarter of fiscal year 2024-25 — the highest quarterly rate in three years — up from 2.2 per cent in the same quarter last year. This has nearly doubled the average growth for the first nine months of the fiscal year to 4.2 per cent, compared to the same period a year earlier.
Ministry of Planning data shows the improved GDP growth was possible despite the drop in Suez Canal revenues on the back of geopolitical tensions. The contribution of extractive industries to growth was also limited, along with a sharp decline in public investment due to the cap imposed on annual public investment expenditure as per Egypt’s agreement with the International Monetary Fund.
Among the sectors driving growth, however, was the non-oil manufacturing sector. According to the Ministry of Planning, the sector was the largest contributor to GDP growth during the quarter, adding 1.9 percentage points to the overall rate. To continue this trend of economic growth experts believe it is crucial to cut interest rates to make borrowing more affordable to investors, allowing them to access capital at a lower cost and expand into new projects, hire more staff, and increase production and export.
The CBE is certainly aware of those factors and doing its best to balance the need to stimulate economic growth with the need to control inflation and maintain financial stability. All indicators point out that the CBE is not backtracking on its monetary easing but only pausing to assess its next move. Most analysts forecast more rate cuts ahead as inflation decelerates further.
As the CBE plays its part to ease monetary policy, the government must pull all the stops to enable the sustainability of growth. It must create an investment-friendly, competitive, export-oriented economy. That is the only way to ensure resilience in the face of global uncertainties.
* A version of this article appears in print in the 17 July, 2025 edition of Al-Ahram Weekly
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