The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) has decided to keep its key policy rates unchanged. The overnight deposit rate, overnight lending rate, and the rate of the main operation remain at 19.00 percent, 20.00 percent, and 19.50 percent, respectively. The discount rate was also maintained at 19.50 percent. This decision reflects the Committee’s assessment of current inflation dynamics and the evolving outlook since the previous MPC meeting.
Globally, economic activity has moderated, weighed down by geopolitical volatility and subdued demand. Inflation remains broadly elevated, though price pressures are uneven across economies, leading central banks to follow divergent policy stances aligned with respective economic conditions. In commodity markets, energy prices have come under renewed upward pressure and exhibited heightened volatility amid escalating regional tensions. Similarly, agricultural prices have trended higher, reflecting supply concerns driven by geopolitical tensions and adverse weather conditions. Overall, the global outlook remains uncertain and susceptible to risks, particularly prolonged tensions, tighter financial conditions, and renewed supply chain disruptions.
Domestically, a continued moderation in real economic activity is estimated for Q2 2026 according to the CBE nowcast, reflecting the adverse impact of regional tensions on economic activity, following a moderation to 5.0 percent in Q1 2026. Accordingly, the CBE expects real GDP growth to average around 5.0 percent in FY 2025/26, with output remaining below potential, though expected to gradually converge toward potential by H2 2027. As such, the output gap trajectory indicates that demand-pull inflationary pressures will remain limited in the short term, supported by the prevailing tight monetary policy stance.
Regarding inflation outturns, annual headline inflation in July 2026 slightly inched up to 14.9 percent from 14.3 percent in June 2026, with annual core inflation recording 14.7 percent compared to 14.3 percent in June 2026. This annual uptick is mainly due to unfavorable base effects, as both monthly core and headline inflation came below expectations, recording 0.0 percent in July 2026. Monthly price dynamics point to broad stability, with a few items registering declines. This suggests that the effects of previous shocks are gradually dissipating—reinforcing the view that they were predominantly transitory.
Against this backdrop, annual headline inflation is projected to accelerate through Q3 2026 on average, partly due to an unfavorable base effect. However, the pace of this acceleration is expected to be more moderate than previously projected at the July 2026 MPC meeting, given the lower-than-expected inflation readings of June and July 2026. Inflation is subsequently expected to gradually decline starting Q1 2027, converging toward the targeted level of 7 percent (± 2 p.p.) during H2 2027. The disinflation path will continue to be supported by a sufficiently tight monetary stance over the forecast horizon, recent easing of month-on-month underlying inflation, and broad-based cooling across CPI components. Nonetheless, the forecasted inflation trajectory remains subject to upside risks, including escalating regional hostilities and a higher-than-expected pass-through from fiscal consolidation measures.
Given the above, the MPC has decided to keep key policy rates unchanged, thereby maintaining an adequately positive real interest rate margin essential to keeping inflation expectations anchored and supporting the projected disinflation path. The Committee will continue to evaluate its monetary stance based on evolving economic conditions, the forecasted inflation trajectory, and the prevailing balance of risks. Looking ahead, the MPC remains firmly committed to price stability and will not hesitate to adjust policy to ensure inflation returns to target in the near term.
التعليقات