Egypt’s central bank cut its benchmark interest rates by 200 basis points on Thursday, bringing the overnight deposit rate to 22 percent and the lending rate to 23 percent, as policymakers moved to ease monetary conditions amid falling inflation and signs of economic recovery. The decision by the Central Bank of Egypt’s Monetary Policy Committee came during its scheduled meeting on August 28, marking the third interest rate cut this year.
The main operation and discount rates were also reduced to 22.5 percent. This follows previous cuts of 225 basis points in April and 100 basis points in May, underlining a more aggressive approach to monetary easing in the second half of 2025. The central bank pointed to continued declines in inflation as a key reason behind the latest policy adjustment. Annual headline inflation dropped to 13.9 percent in July, down from 14.9 percent in June.
Core inflation remained stable at 11.6 percent, while both monthly headline and core inflation recorded negative rates for the second month in a row, at minus 0.5 percent and minus 0.3 percent respectively. These trends reflect easing food prices and a more stable currency environment. Egypt’s monetary policy tightening earlier in 2024, which included a 600 basis point rate hike and the introduction of a managed float of the pound in March, was implemented to address external imbalances and inflationary pressures.
Key economic indicators support Egypt’s policy easing cycle
Those measures were part of broader structural reforms supported by the International Monetary Fund (IMF). Since then, with inflation moderating and foreign exchange markets stabilizing, the central bank has gradually shifted toward supporting economic growth. The bank noted that improved macroeconomic indicators supported the decision. Real GDP growth is expected to rebound to 4.5 percent in the 2024/2025 fiscal year, up from 2.4 percent in the previous year.
The unemployment rate also edged down to 6.1 percent in the second quarter from 6.3 percent in the first quarter, reflecting a modest improvement in labor market conditions. Policymakers also cited better fiscal and external conditions, as well as more favorable global growth prospects, as contributing factors to the rate cut. Egypt’s foreign reserves have shown signs of recovery, bolstered by international financing deals and a growing tourism sector, which has supported the currency and reduced imported inflation.
Unemployment down and GDP growth on upward trajectory
The central bank emphasized that its primary objective remains achieving price stability over the medium term. While inflation has eased, officials acknowledged that risks persist, including volatility in global commodity prices, geopolitical pressures, and the potential for renewed external shocks. Financial markets responded positively to the rate cut, with expectations growing for further easing if disinflation continues and growth accelerates.
A recent poll of analysts projected that Egypt’s interest rates could fall to around 17.5 percent by mid-2026 if current economic trends persist. The next policy meeting of the Central Bank of Egypt is scheduled for late October, by which time additional data on inflation, growth, and external balances will be available to guide further decisions. For now, Thursday’s move signals a clear shift toward supporting domestic demand and sustaining economic momentum without compromising on monetary discipline. – By MENA Newswire News Desk.