The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) has decided today to maintain the CBE’s overnight deposit rate, overnight lending rate, and the rate of the main operation at 24.00 percent, 25.00 percent, and 24.50 percent, respectively. The Committee also decided to keep the discount rate unchanged at 24.50 percent. This decision reflects the most recent outlook and assessment of economic conditions since the previous MPC meeting.
Globally, growth forecasts have softened since the beginning of the year primarily due to persistent uncertainty in global trade policies and the resurgence of geopolitical tensions. In response, central banks in both advanced and emerging market economies have adopted a cautious stance on monetary policy, reflecting the prevailing uncertainties surrounding inflation and economic growth. In terms of global commodity prices, oil prices have recently shown significant volatility, largely influenced by supply-side dynamics and expectations of weakening global demand. Meanwhile, the prices of key agricultural commodities have witnessed a slight decline, supported by favorable seasonal trends. Nevertheless, upside risks to inflation remain elevated, driven by heightened geopolitical tensions, the possibility of further disruptions in global trade policies, and shocks related to climate change.
Domestically, the CBE nowcast for Q2 2025 signals a sustained recovery in economic activity, which is projected to remain close to the 4.8 percent annual figure recorded in Q1 2025 compared to 2.4 percent in Q2 2024. As such, the estimated output gap is gradually narrowing, albeit still marginally negative, with the economic activity expected to reach potential by end of FY 2025/26. Accordingly, demand-side inflationary pressures are expected to remain subdued, supported by the current monetary stance.
Annual headline inflation declined during Q2 2025 to 15.3 percent compared to 16.5 percent in Q1 2025, continuing the general downward trajectory. This can be attributed to broadly stable monthly dynamics, a sufficiently tight monetary stance, and subsiding shocks. In particular, both annual headline and core inflation in June 2025 declined to 14.9 percent and 11.4 percent, respectively. The improvement is mainly driven by deflationary monthly dynamics, with headline and core inflation recording negative 0.1 percent and negative 0.2 percent, respectively—primarily explained by declining food prices and broadly stable non-food inflation.
The recent favorable dynamics in both headline and core inflation have contributed to the improvement of inflation expectations. Therefore, annual headline inflation is expected to stabilize around current levels during the remainder of 2025, before steadily declining in 2026, subject to the stickiness of non-food inflation and the pass-through of fiscal consolidation measures (e.g., administered price changes) to domestic prices. However, a wait-and-see approach is required before proceeding further with the monetary easing cycle, especially that this approach would allow for time to gauge the possible effects of recently announced legislative amendments, such as value-added tax reforms.
In view of the above, the MPC judges that maintaining policy rates at their current level is appropriate to support the disinflation path. The Committee will continue to evaluate its decisions regarding the magnitude and pace of policy adjustment on a meeting-by-meeting basis. These decisions will continue to be a function of the forecast trajectory, and proactively responsive to incoming data and shifts in the balance of risks. The MPC will closely monitor economic and financial developments, and will not hesitate to utilize all tools at its disposal to achieve its price stability mandate, steering inflation towards its target of 7 percent (± 2 percentage points), on average, in Q4 2026.
