The Central Bank of Egypt’s (CBE) Monetary Policy Committee (MPC) kept its key interest rates unchanged at its latest meeting, maintaining the overnight deposit rate at 19%, the overnight lending rate at 20%, and the main operation rate at 19.5%. The discount rate was also held at 19.5%.
The decision comes as the CBE assesses a gradually improving inflation outlook, despite continued regional and global uncertainties and renewed volatility in energy and commodity prices.
The central bank said global economic activity has moderated amid geopolitical tensions and subdued demand, while inflation remains elevated across several economies. Energy prices have come under renewed upward pressure amid escalating regional tensions, while agricultural prices have also increased due to supply concerns linked to geopolitical developments and adverse weather conditions.
Domestically, the CBE expects real economic activity to moderate in the second quarter of 2026, following real GDP growth of 5% in the first quarter.
The central bank projects average real GDP growth of around 5% in FY2025/26, with economic output remaining below potential in the near term before gradually converging toward potential by the second half of 2027.
The output gap is expected to limit demand-driven inflationary pressures in the short term, supported by the CBE’s tight monetary policy stance.
Annual headline inflation rose slightly to 14.9% in July 2026, up from 14.3% in June, while annual core inflation increased to 14.7% from 14.3% over the same period.
The CBE attributed the annual increase primarily to unfavorable base effects. At the monthly level, however, both headline and core inflation recorded 0% in July, coming in below expectations.
The central bank said the latest monthly price data point to broad stability, with several components recording declines, suggesting that the impact of previous inflationary shocks is gradually fading.
Headline inflation is nevertheless expected to accelerate through the third quarter of 2026, partly because of base effects. The CBE said the pace of the expected acceleration should be more moderate than previously projected, following lower-than-expected inflation readings in June and July.
Inflation is then expected to resume a gradual downward trajectory from the first quarter of 2027, reaching the CBE’s target of 7% ±2 percentage points in the second half of 2027.
The disinflation path is expected to be supported by the tight monetary stance, easing underlying monthly inflation and broad-based cooling across consumer price components.
Against this backdrop, the MPC said maintaining current policy rates would preserve an adequately positive real interest-rate margin, which it considers essential for anchoring inflation expectations and supporting the disinflation process.
The central bank cautioned, however, that the inflation outlook remains exposed to upside risks, particularly any escalation in regional hostilities and a higher-than-expected pass-through from fiscal consolidation measures.
The MPC said it will continue to assess monetary policy based on economic developments, the projected inflation path and the balance of risks.
It reiterated its commitment to price stability and said it would adjust its monetary stance if necessary to ensure inflation returns to target in the near term.
