Egypt’s central bank surprises markets with first rate hike since 2024

The Central Bank of Egypt (CBE) raised its key interest rates by 100 basis points on Thursday, its first increase since March 2024, in a move that caught analysts off guard as the pound slid to record lows.

The monetary policy committee lifted the overnight deposit rate to 20% and the overnight lending rate to 21%, from 19% and 20% respectively.

The decision defied market expectations. All 13 analysts surveyed by Reuters earlier this week had forecast a sixth consecutive hold.

Defending the disinflation path

The CBE cited difficult external conditions and heightened uncertainty, saying the tightening was intended to anchor inflation expectations and protect the ongoing disinflation trend.

Price pressures have eased in recent months. Annual urban headline inflation slowed to 13.9% in September from 14.5% in August, while core inflation fell to 14.1% from 14.9%.

The hike comes as the Egyptian pound weakens sharply. The currency hit a record low of 56 to the US dollar on Monday, according to LSEG data, raising concerns about imported inflation in a country heavily reliant on food and fuel imports.

Regional tensions, including the conflict with Iran and disruption around the Strait of Hormuz, have weighed on emerging-market currencies and capital flows across the region.

On the growth front, the central bank expects activity to remain broadly stable in the third quarter of 2026, hovering near the 4.7% pace recorded in the second quarter.