CBE resumes its easing cycle with 200 bps cut

The Central Bank of Egypt (CBE) cut interest rates by 200 bps in its fifth meeting of the year on Thursday, the bank said in a statement. The decision marks a resumption of the Monetary Policy Committee’s (MPC) easing cycle, which was paused in July after two consecutive cuts totalling 325 bps in April and May, and the bank’s third rate cut since November 2020.

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Where rates currently stand: The overnight deposit rate now stands at 22.0%, the overnight lending rate at 23.0%, and the main operation and disc. rates at 22.5%. Rates are now down a whole 525 bps since the bank began its easing cycle in April.

The why: The MPC stayed firm with its data-driven approach and pointed toward slowing inflation “alongside improving underlying dynamics relative to previous months, and more supportive exchange rate developments” as having created the room for a “measured resumption of monetary easing.” The monthly deflation over the past two months suggests a wider downward trend, “boosted by broad-based easing in price dynamics and a sufficiently tight monetary stance, which suggests an improvement in inflation expectations.”

REMEMBER- Annual headline urban inflation cooled further in July by a whole percentage point, falling to 13.9% — inflation is now at its slowest since March 2025. Monthly urban inflation fell 0.5%, after shedding 0.1% the month before.

The CBE expects inflation to continue its downward path to hit an average of 14-15% in 2025, following a 1.3 percentage point decline from the previous quarter to 15.2% in 2Q 2025. Looking further ahead, the committee expects inflation to continue to make progress toward its 7% (± 2 percentage points) target for 4Q 2026.

But slowing inflation is far from certain, with numerous upside risks ahead, the committee warned. The region is still facing the possibility of escalating geopolitical tensions, while trade uncertainty stemming from ever-changing tariff policies is also contributing to global uncertainty, according to the MPC. Deutsche Bank also highlighted in a note seen by EnterpriseAM that the “pace of fiscal consolidation” set by Egypt as it looks to wrap the next review of its USD 8 bn Extended Fund Facility Arrangement with the International Monetary Fund will be “key in determining the magnitude of upside risks to this forecast.” The bank also pointed to the possibility of the return of UN sanctions on Iran as an important factor to watch in the coming weeks.

The bank noted faster-than-expected growth in 4Q 2024-2025 — growth is expected to have hit 5.4% during the three-month period, pushing up average growth for the previous fiscal year to 4.5% — up a whole 2.1 percentage points y-o-y. The bank attributed this to “positive contributions of non-petroleum manufacturing and tourism” and added that despite the forecasted growth uptick, “demand-side inflationary pressures are projected to remain contained.”

The 200 bps cut came in line with forecasts from analysts polled by EnterpriseAM lastweek, with eleven economists forecasting a rate cut between 100-300 bps and only one analyst predicting a hold.

“We are one-third of the way through the journey of lowering interest rates, and we have two-thirds left,” Al Ahly Pharos Head of Research Hany Genena told EnterpriseAM. The remaining two-thirds of the cutting cycle should see headline rates approaching 14.0%, Genena added.

The easing of inflation is also “something we as citizens feel, not just economists,” with the slowing and even reduction of prices in several sectors being indicative of a wider disinflationary trajectory, he told us. A strengthening EGP — which Genena thinks could hit EGP 46 against the USD — on the back of Qatar’s renewed USD 7.5 bn investment pledge, relatively low inflation, and export expansions, should help cushion the impact of any future fuel price hikes.

Most think that the bank still has plenty more cuts to make this year, including Capital Economics Senior MENA Economist James Swanston, who sees a further 400 bps worth of cuts by the end of 2025, according to a note. This would push headline rates to 18.0%, which Swanston notes would bring real interest rates to among the highest of emerging markets and leave “plenty of scope for further loosening in 2026.” Among those with less dovish forecasts is Deutsche Bank, which sees rates being cut a further 200 bps, standing by its previous forecast that cumulative cuts would reach 725 bps in 2025.

Local banks are getting ready to follow suit, with Banque Misr and others convening their asset-liability committees today to review interest rates on their savings products in light of last week’s policy rate cut. Banque Misr said in a statement seen by EnterpriseAM that it is looking into changes to its deposit and certificate rates.

The cut also caught the attention of some corners of the international business press, including Bloomberg and Reuters.