The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) met on Thursday, and decided to maintain key interest rates, including the overnight deposit rate (), the lending rate (), and the main operation rate (). The decision to hold rates reflects the MPC’s current assessment of domestic inflation forecasts.
Global and domestic economic backdrop
Globally, the CBE noted that economic growth is continuing but is dampened by geopolitical tensions and uncertainty in trade policies. Central banks worldwide are pursuing a cautious approach. While commodity prices (especially oil) are generally stable, the CBE emphasized that inflation still faces upside risks, primarily due to potential supply chain disruptions.
On the domestic front, the CBE reported that real GDP growth slightly increased to 5.2% in Q3 2025 (up from 5.0%), primarily driven by strong performance in the non-petroleum manufacturing, trade, and tourism sectors. The CBE projects the economy will reach maximum capacity by the end of FY 2025/2026. However, the unemployment rate rose slightly to 6.4% in the same quarter.
Inflation rises, driven by services sector
On inflation, both annual headline inflation () and core inflation () increased in October 2025. The monthly increase was attributed to a rise in non-food prices, particularly services, which offset the moderation in food price inflation. The CBE stressed the need for further monthly inflation decline to meet its official target.
CBE’s inflation forecast and upside risks
The CBE forecasts that annual headline inflation will temporarily rise in late Q4 2025 due to the impact of energy price increases, before declining again in the second half of 2026 toward the bank’s target. However, the inflation outlook is subject to significant upside risks, including escalating geopolitical tensions, stubborn services inflation, and unforeseen effects from fiscal consolidation measures.
Maintaining a cautious stance towards 2026 target
In light of these persistent risks, the MPC decided to maintain a “wait-and-see” (or cautious) approach by holding interest rates steady. This decision aims to contain inflationary pressures, anchor market expectations, and ensure inflation remains on a downward path. The MPC reaffirmed its commitment to using all necessary tools to achieve its ultimate inflation target of 7% ( percentage points) by Q4 2026.
