Egypt's central bank (CBE) cut its key interest rates by 225 basis points on Thursday, delivering its first rate cut in nearly five years, citing easing inflationary pressures and a sustained economic recovery. The bank's Monetary Policy Committee (MPC) decided to cut the CBE's overnight deposit rate, overnight lending rate, and the rate of the main operation by 225 basis points to 25.00 percent, 26.00 percent, and 25.50 percent, respectively. The Committee also decided to cut the discount rate by 225 basis points to 25.50 percent. "The sharp decline in annual headline inflation by approximately 9.0 p.p. in Q1 2025, as largely anticipated, significantly tightened the monetary stance, availing ample room for commencing the easing cycle." the MPC said in a statement. The central bank attributed the decline to "a sizable favourable base effect, cumulative monetary tightening, and the fading impact of previous shocks." "The MPC judges that cutting policy rates by 225 basis points aligns with upholding the appropriate monetary stance, with the aim of anchoring inflation expectations and safeguarding the projected disinflation path," the CBE said in a statement. On the domestic front, real GDP growth exceeded 4.3 per cent in the first quarter of 2025, supported by non-oil manufacturing, trade, and tourism. However, the central bank noted that the economy is still operating below full capacity, creating conditions conducive to further disinflation. Globally, the CBE flagged uncertainty over growth and inflation amid volatile commodity prices, supply chain disruptions, and heightened geopolitical tensions, all of which continue to pose risks to the outlook. The MPC signalled that future decisions will be data-driven, adding it remains committed to steering inflation toward its 7 per cent ±2 percentage point target by the fourth quarter of 2026. The easing comes after a prolonged tightening cycle that saw cumulative rate hikes of 1,100 bps since early 2022 as Egypt grappled with soaring inflation and external shocks. Attribution: Amwal Al Ghad English Download
