The Central Bank of Egypt (CBE) expects headline inflation to remain broadly stable in the third quarter of 2026 before gradually declining toward its target of 7% ±2 percentage points in the second half of 2027.
The central bank lowered its inflation outlook from its previous Monetary Policy Committee (MPC) meeting in August, citing recent developments that were more favorable than previously expected, according to its monetary policy report issued Thursday.
Headline annual inflation edged down to 14.5% in August 2026, driven by lower food inflation, which offset the impact of higher electricity tariffs and rents.
Core inflation remained relatively stable at 14.9% in August, reflecting broadly stable price developments across key food, consumer goods and services categories.
The CBE said recent price developments continue to point to a downward inflation trend, supported by broad-based stability across consumer price index components over the past three months.
The downward revision to the inflation outlook supports the current monetary conditions, which remain sufficiently restrictive to reinforce the expected disinflation path.
However, the central bank said the balance of risks to the inflation outlook remains tilted to the upside amid renewed regional hostilities. Risks include the potential impact of fiscal consolidation measures on domestic prices and global food prices rising faster than expected, particularly if elevated global energy prices persist for an extended period.
CBE keeps interest rates unchanged
The MPC kept its key interest rates unchanged, leaving the overnight deposit rate at 19%, the overnight lending rate at 20% and the CBE’s main operation rate at 19.5%.
The committee also maintained the credit and discount rate at 19.5%.
The CBE said the decision reflected its assessment of recent inflation developments and outlook, as well as changes in the risks surrounding the inflation trajectory.
Economic growth
Egypt’s real economic activity continued to expand at a moderate pace, with GDP growth slowing to 4.7% in the second quarter of 2026 from 5% in the first quarter, mainly reflecting the impact of regional tensions.
Real GDP growth averaged 5.1% during FY2025/26, and the CBE expects growth to remain broadly at that level during FY2026/27.
The central bank said the economy is still operating below its potential, with output expected to gradually approach its full potential in the second half of 2027.
The expected output gap indicates that demand-driven inflationary pressures will remain contained in the near term, supported by appropriately restrictive monetary policy.
Global economic activity
Global economic activity slowed slightly amid geopolitical volatility and weaker demand, although continued growth in trade and investment provided support.
Inflation rates remain elevated in general, with the intensity of price pressures varying across economies and prompting central banks to maintain cautious monetary policies aligned with prevailing economic conditions.
Energy and agricultural commodity prices have risen amid escalating regional tensions and supply concerns.
The CBE said the global economic outlook remains uncertain and exposed to risks including prolonged regional tensions, tighter financial conditions and renewed supply-chain disruptions.
Monetary policy assessment
The MPC said the current degree of monetary tightening provides room to contain risks surrounding the inflation outlook and preserve the expected downward price trajectory.
The committee will continue to assess monetary conditions based on economic developments affecting the inflation outlook and surrounding risks, while maintaining its readiness to use available policy tools to safeguard price stability.