Egypt’s central bank lowered its benchmark interest rates by two percentage points on Thursday, its largest reduction in over a year, as inflation eased and economic growth outpaced expectations.
The Monetary Policy Committee of the Central Bank of Egypt reduced the overnight deposit rate to 22 percent from 24 percent. The overnight lending rate was cut to 23 percent, while the main operation and discount rates were lowered to 22.5 percent.
In a statement, the bank said the move reflected “a more favorable inflation outlook and an improving domestic economy.” Annual headline inflation slowed to 13.9 percent in July, from 14.9 percent in June. Both headline and core inflation registered month-to-month declines, signaling rare deflationary pressure in a country long battered by price surges.
Economic activity, meanwhile, has accelerated. Gross domestic product grew 5.4 percent in the second quarter of 2025, compared with 2.4 percent in the previous fiscal year, supported by gains in manufacturing and tourism. The unemployment rate dropped to 6.1 percent, down from 6.3 percent a quarter earlier.
The easing aligns Egypt with a global trend as central banks in both advanced and emerging markets have cautiously cut rates as inflation expectations stabilize. But risks remain, the CBE warned, citing volatile oil markets, potential adjustments to state-administered prices, and regional geopolitical tensions.
The bank projects inflation to average 14 to 15 percent for the rest of 2025 before gradually converging toward its target of 7 percent, plus or minus 2 percentage points, by late 2026. It reaffirmed its longer-term goal of 5 percent by the end of 2028.
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