Egypt’s Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) held its meeting on February 20, 2025, making a strategic decision to maintain the country’s key interest rates.

The overnight deposit rate remains at 27.25%, the overnight lending rate at 28.25%, and the rate of the main operation at 27.75%. Additionally, the discount rate remains steady at 27.75%.

Global and Domestic Economic Context

The global economic outlook continues to present challenges, with advanced and emerging markets exhibiting a mix of cautious monetary policies.

Some central banks have opted for gradual rate cuts, while others remain vigilant, assessing the evolving economic landscape.

Economic growth worldwide has remained stable, though it has yet to return to pre-pandemic levels. A major concern is the restrictive monetary policies that could suppress demand, alongside the return of protectionist trade policies, which may disrupt global trade flows.

In Egypt, the domestic economy demonstrated resilience in Q4 2024, with preliminary indicators signalling accelerated economic activity.

This growth outpaced the 3.5% registered in Q3 2024, driven largely by the manufacturing and transportation sectors. Despite this positive momentum, real GDP remains below its full potential.

However, projections suggest that the economy will steadily approach its optimal performance by the end of the 2025/26 fiscal year.

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Inflation Trends and Monetary Policy Response

Egypt has experienced a gradual slowdown in inflation. By January 2025, annual inflation stabilised at 24.0%, reflecting a moderated deceleration compared to the first half of 2024.

Core inflation remained steady in Q4 2024 at 22.6%, with food inflation slowing to 20.8%. However, non-food inflation remains persistently high, averaging 25.5% throughout 2024.

This suggests that while food prices have seen some relief, other inflationary pressures are yet to subside completely.

The MPC acknowledges the increasing risks to the inflation outlook, particularly given the uncertainties resulting from geopolitical tensions and the potential impact of U.S. protectionist trade policies.

Despite these risks, headline inflation is expected to decline significantly in Q1 2025. This downward trend will be supported by previous monetary policy tightening and favourable base effects, although the pace of decline may slow due to fiscal tightening measures.

Why Interest Rates Remain Unchanged

The decision to maintain interest rates reflects the MPC’s commitment to ensuring price stability and controlling inflation. By keeping a restrictive monetary position, the central bank aims to solidify the projected disinflation trajectory and stabilise inflation expectations.

Given the heightened uncertainty, the MPC will assess the appropriate time to shift towards a more accommodative stance on a meeting-by-meeting basis.

The CBE has emphasised that it remains vigilant in monitoring economic and financial developments. It will not hesitate to deploy necessary tools to achieve its price stability mandate, ensuring inflation is contained by mitigating demand-side pressures and preventing secondary effects from supply shocks.

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The Path Ahead for Egypt’s Economy

Looking forward, Egypt’s economic recovery is set to continue, with real GDP expected to gain momentum in the coming quarters.

Employment figures have also shown improvement, with the unemployment rate dropping from 6.7% in Q3 2024 to 6.4% in Q4 2024. However, challenges remain, including the impact of volatile global commodity prices, geopolitical tensions, and restrictive trade policies.

The central bank’s measured approach to monetary policy will be crucial in navigating these uncertainties while supporting sustainable economic growth.

As the global and regional economic environment continues to evolve, Egypt’s monetary authorities will need to balance inflation control with encouraging economic expansion, ensuring long-term financial stability for the nation.