Egypt cuts interest rate again as inflation pressures eases
Egypt’s central bank announced on Thursday that it has lowered its benchmark deposit rate by 100 basis points to 20 percent, representing the fifth cut to interest rates by the monetary authority this year.
This latest cut reflects a growing sense of confidence among decision-makers that inflationary pressures are receding after a prolonged period of stringent monetary policy aimed at stabilizing prices and the economy as a whole.
With this change, Egypt’s policy rate is now at its lowest point since January 2024, indicating a notable shift in the country’s monetary approach over the last year.
As a result, Africa’s second-largest economy has reduced its main interest rate by a total of 725 basis points, from 27.25 percent down to 20 percent, between February and December.
In a statement following the meeting, the Central Bank of Egypt (CBE) declared that its Monetary Policy Committee also lowered the lending rate to 21.00 percent and adjusted the main operation rate to 20.50 percent.
The statement additionally specified that the discount rate was likewise reduced to 20.50 percent as part of the comprehensive adjustment to borrowing costs.
The central bank noted that “The decision reflects the committee’s evaluation of recent inflation trends and updated forecasts since its last meeting.”
Egypt has maintained high borrowing costs for most of the past two years as authorities aimed to manage inflation triggered by repeated currency devaluations, supply chain disruptions, and increasing fiscal pressures.
During this time, the nation experienced some of the highest interest rates in the region, especially since 2022, as policymakers focused on achieving price stability and defending the currency.
Nonetheless, officials in Cairo have gradually relaxed monetary conditions throughout 2025, indicating a strategic pivot intended to foster domestic investment, enhance economic activity, and improve financing conditions.
The recent rate cut follows the release of new data showing that annual urban inflation decreased to 12.3 percent in November, down from a three-month high of 12.5 percent noted in October.
This decline in inflation was primarily attributed to a slowdown in food price increases, which significantly contributed to the overall reduction in consumer price pressures.
The unexpected drop has alleviated some of the burdens on policymakers, who had earlier enforced tight monetary conditions to stabilize prices and support the currency following last year’s inflation spike.
Thursday’s decision also marks a return to Egypt’s easing cycle after a previous pause, during which officials evaluated the effects of earlier rate cuts on inflation and financial stability.
Concerns regarding inflation had previously limited policymakers’ actions, leading them to adopt a cautious approach amidst currency fluctuations and ongoing external financing challenges.
The central bank has gradually adjusted its policy stance as price pressures have eased, foreign currency inflows have become stronger, and financial conditions have stabilized under Egypt’s reform program backed by the International Monetary Fund.
While borrowing costs are still high by historical measures, the total cuts made this year suggest a growing confidence that inflation is on a consistent downward path.
This developing perspective has created space for monetary policy to slowly shift towards promoting economic growth without compromising price stability.
Leave A Comment