The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) decided to keep its key policy rates unchanged at its meeting on Thursday, September 24, 2026
The CBE maintained the overnight deposit rate at 19.00%, the overnight lending rate at 20.00%, and the rate of the main operation at 19.50%. The discount rate was also kept unchanged at 19.50%
The decision reflects the MPC’s assessment of recent and expected inflation developments, as well as the evolving balance of risks surrounding the inflation outlook
Global Economic Activity Moderates Amid Geopolitical Risks
The CBE said global economic activity has moderated, affected by geopolitical volatility and subdued demand, while resilient global trade and investment continue to provide support
Global inflation remains broadly elevated, despite varying price trends across economies, prompting central banks to maintain cautious monetary policy stances in line with their respective economic conditions
Commodity markets have also recorded broad-based price increases, with energy and agricultural prices rising amid escalating regional tensions and concerns over supply
The CBE noted that the global economic outlook remains uncertain and exposed to risks, including prolonged geopolitical tensions, tighter financial conditions and renewed supply chain disruptions
Egypt’s Economic Growth Remains Moderate
On the domestic front, real economic activity continued to moderate, with economic growth reaching 4.7% in the second quarter of 2026, compared with 5.0% in the first quarter
The CBE attributed the slowdown mainly to the adverse impact of regional tensions
Real GDP growth averaged 5.1% during fiscal year 2025/26 and is expected to remain broadly stable around this level during fiscal year 2026/27
However, the CBE noted that economic output remains below its potential and is expected to gradually converge toward full capacity during the second half of 2027
Accordingly, the projected output gap suggests that demand-side inflationary pressures will remain limited in the short term, supported by a sufficiently tight monetary policy stance
Headline Inflation Eases to 14.5%
Annual headline inflation eased marginally to 14.5% in August 2026, mainly driven by a decline in food inflation, which offset increases in electricity tariffs and housing rents
Meanwhile, annual core inflation remained relatively stable at 14.9% in August 2026, reflecting broadly stable price developments across core food items, retail goods and services
The CBE said annual price developments continued to reflect a disinflationary trend, supported by broad-based price stability across the Consumer Price Index basket over the past three months
Monthly headline inflation recorded -0.4% in June, 0.0% in July and 0.1% in August 2026
CBE Revises Inflation Forecast Lower
In light of recent inflation developments, which came in more favorably than previously expected, the CBE revised its inflation forecast downward compared with its assessment at the August MPC meeting.
The CBE expects annual headline inflation to stabilize on average during the third quarter of 2026 before gradually declining and converging toward its target of 7%, plus or minus 2 percentage points, during the second half of 2027
The downward revision to the inflation forecast reinforces the current monetary policy stance, which the CBE considers sufficiently tight to further support the expected disinflation path
Upside Risks to Inflation Remain
Despite the improved inflation outlook, the balance of risks remains tilted to the upside, reflecting the resurgence of regional hostilities.
According to the CBE, these risks could feed into domestic inflation through a higher-than-anticipated pass-through from fiscal consolidation measures and international food prices, particularly if global energy prices remain elevated for an extended period.
Why Did the CBE Keep Interest Rates Unchanged
In light of these developments, the MPC decided to maintain the current level of monetary policy restrictiveness, which it considers an important buffer against the risks surrounding the inflation outlook
The CBE said the current policy stance supports the projected disinflation path while allowing the MPC to continue assessing evolving economic conditions and inflation developments
The MPC will continue to evaluate its monetary policy stance based on economic conditions, the projected inflation trajectory and the prevailing balance of risks, while remaining ready to use all available policy tools to safeguard price stability
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