The  Central Bank of Egypt (CBE) cut its key interest rates by 200 basis points, marking a pivot toward monetary easing as inflation slows and growth outperforms expectations, the bank said in a press statement following its Monetary Policy Committee (MPC) meeting on August 28.

The overnight deposit rate was cut to 22%, the lending rate to 23%, and the main operation rate to 22.5%. The credit and discount rate was also reduced to 22.5%.

The decision was anticipated by many economists, supported by July’s favourable inflation data, which showed no significant upward pressures even after adjustments to the value-added tax law. Egyptian pound’s strong appreciation against the dollar and expectations that the US Federal Reserve could lower rates in September, both of which strengthen the case for a CBE cut. Egypt’s real interest rate, currently around 10%, is comfortably positive, while inflation momentum has slowed sharply.

The MPC said the move aims to anchor disinflation trends while supporting economic activity without jeopardising price stability. Headline inflation eased to 13.9% in July from 14.9% in June, with core inflation stable at 11.6%. On a monthly basis, headline and core prices fell 0.5% and 0.3%, respectively. Labour market conditions also improved, with unemployment slipping to 6.1% in Q2 from 6.3% a quarter earlier.

Growth momentum has strengthened. Preliminary central bank estimates put Q2 GDP at 5.4%, lifting projected growth for FY 2024/25 to 4.5%, compared with 2.4% the year before. The expansion is being driven chiefly by non-oil manufacturing and tourism.

The CBE also said that the global conditions are reinforcing the shift. Softer commodity prices, moderating worldwide inflation, and a gradual turn toward policy easing by major central banks have created a more supportive backdrop for rate cuts.

Looking ahead, the central bank expects inflation to continue decelerating, averaging 14%–15% in 2025, and to move closer to its upper 9% target by Q4 2026. 

Meanwhile, state-owned Banque Misr announced it will convene its Assets and Liabilities Committee (ALCO) on August 31 to review interest rates on its savings certificates and deposit products, following the CBE move to slash key policy rates, according to Al Mal. Other banks, including the National Bank of Egypt, the country’s largest state lender, are expected to assess the impact of the cut on the savings instruments shortly.