The Central Bank of Egypt (ECB) announced a substantial 225 basis point cut in its key interest rates on Thursday, signaling the commencement of a monetary easing cycle after a prolonged period of tightening measures aimed at curbing inflation.
The decision sets the deposit rate at 25.00 percent and the lending rate at 26.00 percent.
This move, the first rate cut in several months, marks a significant turning point in the country’s monetary policy stance and reflects the ECB’s growing confidence in the gradual improvement of macroeconomic stability observed in recent months.
In an official statement, the Monetary Policy Committee (MPC) justified this policy shift by pointing to several positive economic indicators, most notably the sharp decline in inflation. Headline annual inflation has fallen to 13.6 percent, while core inflation has dropped to 9.4 percent, marking its lowest level in three years. The MPC attributed this significant decrease primarily to the base effect, the easing of past economic shocks, and the lagged impact of previous monetary tightening measures implemented by the central bank.
The ECB also noted that while the Egyptian economy achieved a growth rate of 4.3 percent in the first quarter of 2025, this figure remains below the country’s full potential, thereby limiting demand-side inflationary pressures.
Looking ahead, the Central Bank’s forecasts predict a continued downward trend in inflation throughout 2025 and 2026, with an ambitious target of reaching 7 percent ± 2 percent by the end of 2026. This significant interest rate cut suggests the ECB’s belief that the current economic conditions provide an opportunity to support growth without jeopardizing the progress made in controlling inflation. The move is likely to have implications for borrowing costs, investment, and overall economic activity in Egypt in the coming months.
SL/te/Sf/fss/abj/APA