The Central Bank of Egypt has cut its key interest rates by 100 basis points at its final monetary policy meeting of 2025, signalling growing confidence that inflationary pressures are easing and that the economy can absorb a gradual shift towards looser financial conditions.
A decisive year-end adjustment
The rate cut applies to the overnight deposit, lending, and main operation rates, marking the first significant easing step after a prolonged period of tight monetary policy. The decision follows months of disinflation driven by base effects, currency stabilisation, and improved foreign-currency inflows. Policymakers described the move as calibrated, aiming to support economic activity without undermining hard-won gains in price stability.
Inflation trends shape the decision
Annual headline inflation has moderated steadily through the second half of 2025 after peaking earlier in the year amid subsidy reforms and exchange-rate adjustments. Food-price pressures have eased, while non-food inflation has slowed as domestic demand cooled. The central bank noted that inflation expectations have begun to stabilise, allowing room for a cautious reduction in borrowing costs while maintaining a restrictive stance in real terms.
Balancing growth and stability
High interest rates have weighed heavily on credit growth, private investment, and household consumption. By lowering rates, the central bank aims to ease financing conditions for businesses, particularly in manufacturing, agriculture, and export-oriented sectors. Officials stressed, however, that monetary policy remains data-dependent and that further easing will be gradual, contingent on continued progress in inflation and external balances.
Currency and external position considerations
The Egyptian pound has shown relative stability in recent months, supported by foreign-investment inflows, stronger tourism revenues, and remittances from Egyptians abroad. The central bank highlighted improvements in foreign-exchange liquidity and reserve buffers as key factors underpinning its confidence. Maintaining currency stability remains a priority, given Egypt’s reliance on imports and sensitivity to global commodity prices.
Markets and investor reaction
Financial markets largely anticipated the move, with bond yields already drifting lower in recent weeks. Analysts viewed the cut as a positive signal for domestic equities and fixed-income markets, suggesting it could help revive risk appetite while reducing the government’s debt-servicing costs. International investors, however, remain focused on Egypt’s fiscal discipline and reform commitments, particularly in relation to state-owned enterprises and subsidy frameworks.
Outlook for 2026
Looking ahead, the central bank signalled that policy in 2026 will hinge on the trajectory of inflation, global monetary conditions, and geopolitical risks affecting energy and food prices. While further rate cuts are possible, officials cautioned against expectations of rapid easing. The priority, they said, is to anchor inflation sustainably while fostering a recovery that supports employment and long-term growth.
Newshub Editorial in Africa – 28 December 2025
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