CBE balances economic growth and inflation risks with rate decision

Egypt’s Central Bank (CBE) has opted to keep interest rates unchanged for the seventh consecutive time, signaling a cautious approach to monetary policy as inflation risks persist.

Following its first Monetary Policy Committee (MPC) meeting of 2025, the CBE maintained the overnight deposit rate at 27.25 percent, the overnight lending rate at 28.25 percent, and the main operation rate at 27.75 percent. The discount rate remains at 27.75 percent.

The MPC emphasized that this decision reflects the central bank’s strategy to balance economic recovery with inflationary pressures and global uncertainties. 

While some global central banks have begun cutting rates, others remain hesitant due to volatile commodity prices, geopolitical tensions, and evolving U.S. trade policies.

Economic Growth and Inflation Trends

Preliminary data from Q4 2024 indicates accelerated economic growth, particularly in the manufacturing and transportation sectors. 

The unemployment rate improved, declining to 6.4 percent from 6.7 percent in Q3 2024. However, real GDP remains below its potential, suggesting that disinflationary pressures will persist in the near term.

Annual headline inflation stabilized at 24 percent in January 2025, while core inflation stood at 22.6 percent. Food inflation showed signs of relief, dropping to 20.8 percent, but non-food inflation remained high, averaging 25.5 percent throughout 2024. 

Upside risks to inflation remain elevated, driven by global commodity price fluctuations and regional geopolitical uncertainties.

Despite ongoing challenges, the CBE anticipates a notable decline in inflation during Q1 2025, supported by monetary tightening and favorable base effects. However, fiscal tightening measures could slow the pace of disinflation later in the year.

The central bank reaffirmed its commitment to a tight monetary stance to anchor inflation expectations. Future rate adjustments will depend on inflation dynamics and the balance of economic risks.

The unchanged interest rates signal a cautious yet firm approach to monetary policy, which could impact business borrowing costs and investment strategies. 

Companies operating in interest-sensitive sectors should closely monitor future policy shifts. Meanwhile, investors seeking stability may view Egypt’s stance as a sign of prudence amid economic uncertainties.