Ahmed Kamel – Egypt Daily News
In a move aimed at supporting economic recovery and consolidating recent progress on inflation control, the Central Bank of Egypt (CBE) announced on Thursday, August 28, 2025, a 200 basis point cut in its key interest rates. The decision reflects the Monetary Policy Committee’s (MPC) updated assessment of both domestic and global economic developments.
Following the adjustment, the overnight deposit rate now stands at 22.00%, the overnight lending rate at 23.00%, and the main operation rate at 22.50%. The discount rate has also been reduced by 200 basis points to 22.50%.
In its official statement, the MPC said the move was consistent with the anticipated downward trajectory of inflation in the short term, and that the easing cycle is being cautiously resumed in light of improved inflation dynamics, a recovering economy, and a more stable currency environment.
Global Context Supports Gradual Monetary Easing
Globally, recent months have seen early signs of economic recovery and stabilization in inflation expectations. In response, central banks across both advanced and emerging markets have gradually eased monetary conditions, though many remain cautious given persistent geopolitical uncertainties and uneven commodity price movements.
Oil prices have exhibited moderate volatility, primarily due to supply-side factors, while agricultural commodity prices have followed mixed trends. Despite these improvements, global growth and inflation remain vulnerable to risks such as escalating geopolitical tensions and disruptions in global trade policies.
Domestic Outlook Strengthens Amid Cooling Inflation
Domestically, Egypt’s economic outlook has shown notable improvement. Preliminary estimates from the central bank indicate that real GDP growth accelerated in the second quarter of 2025, surpassing previous forecasts. This uptick was largely driven by strong performance in non-oil manufacturing and a rebound in the tourism sector.
According to CBE projections, the economy expanded at a rate of 5.4% in Q2 2025. For the full fiscal year 2024/2025, the bank expects average growth to reach 4.5%, a significant recovery from the 2.4% recorded in FY 2023/2024.
Labor market indicators have also improved, with the national unemployment rate declining to 6.1% in Q2 2025, down from 6.3% in the previous quarter.
On the inflation front, headline inflation slowed to 13.9% in July 2025, down from 14.9% in June, while core inflation remained broadly stable at 11.6%, compared to 11.4% the previous month. On a monthly basis, both headline and core inflation recorded negative readings of -0.5% and -0.3%, respectively. This marks the second consecutive month of negative inflation, reinforcing confidence in the declining inflation trend.
CBE forecasts now suggest that inflation will continue its descent, averaging between 14% and 15% over the course of 2025. If current conditions persist, inflation is expected to fall within the central bank’s target of 7% (±2 percentage points) by Q4 2026 and 5% (±2 percentage points) by Q4 2028.
The bank attributed this positive trajectory to a combination of tighter monetary policy, the stabilization of the Egyptian pound, and easing monthly inflation pressures.
Risks Remain, But Policy Signals Optimism
Despite the optimistic outlook, the CBE cautioned that inflation expectations remain susceptible to domestic and external risks. These include the potential for government-controlled price adjustments to exceed forecasted limits, and further geopolitical instability in the region, which could disrupt supply chains and commodity markets.
Nonetheless, the MPC expressed confidence that the latest rate cut was appropriate under current conditions and signaled its commitment to maintaining a data-driven approach. Future decisions on the pace and extent of further easing will continue to be assessed on a meeting-by-meeting basis, the committee noted.
“The committee will not hesitate to use all available tools to achieve price stability and guide inflation toward its medium-term targets,” the bank’s statement concluded.
