Egypt’s central bank cut interest rates by 100 basis points on Thursday as inflation continued to ease, signalling confidence that price pressures will slow further this year.
After its first Monetary Policy Committee meeting of the year, the Central Bank of Egypt (CBE) trimmed its benchmark overnight deposit rate to 19.0%, the overnight lending rate to 20.0%, and the main operation rate to 19.5%.
Additionally, the bank stated that “the discount rate was set at 19.5%”, while the Required Reserve Ratio (RRR) for commercial banks was reduced to 16% from 18%, freeing up additional liquidity in the banking system.
The CBE linked its dovish stance to easing inflationary pressures, saying the decision followed its “assessment of current inflation dynamics and the evolving outlook since the previous MPC meeting.”
It described the policy rate reduction and lower reserve requirement as “consistent with upholding a monetary policy stance conducive to achieving the inflation target.”
The bank added that the RRR reduction aims at safeguarding the “effectiveness of monetary policy transmission through ensuring effective pass-through of CBE decisions to money markets and the broader economy by appropriately calibrating liquidity conditions within the banking system.”
Inflation cools further
Official data showed annual urban inflation slowed to 11.9% in January from 12.3% in December. Core inflation eased to 11.2% from 11.8% over the same period.
The CBE noted that headline and core inflation averaged 14.1% and 12.1% in 2025, down sharply from 28.3% and 27.2% in 2024. It said the deceleration was driven largely by food inflation at its lowest level in four years, alongside a slower pace of non-food inflation. Non-food categories benefited from currency strength, soft domestic demand, and anchored expectations.
The bank expects annual inflation to hover near current levels in the first quarter before resuming its downward trend later in the year. “Inflation is on track to reach the CBE target of 7% (± 2 p.p.), on average, in Q4 2026,” it said, citing easing pressures, fading earlier shocks, contained demand-side pressures, and a strengthening external position.
However, policymakers warned that risks persist. “The disinflation path remains constrained by relatively persistent non-food inflation and susceptible to upside risks, including a higher-than-expected pass-through from fiscal consolidation measures to inflation and a possible re-escalation of global and regional geopolitical tensions,” the bank said.
Separate figures from the Central Agency for Public Mobilization and Statistics (CAPMAS) showed “CPI of Urban Egypt for January 2026 reached 267.6 (and) registered a monthly rate of 1.2%,” compared with 1.5% in January 2025 and -0.2% in December.
Food and non-alcoholic beverages rose just 1.9% year-on-year, helping to cool headline inflation. By contrast, housing and utility costs climbed 29.8%, transport 27.5%, and healthcare 18.4%.
In rural areas, the index reached 268.5, posting a monthly rate of 1.7% and an annual rate of 8.4%. Nationally, “CPI of Total Egypt for January 2026 reached 268.1 (and) registered a monthly rate of 1.5 % compared with December 2025 and an annual rate of 10.1% compared with January 2025 (rate of 10.3%),” CAPMAS said.
Core inflation also moderated. According to the CBE, it decreased month-on-month to 1.2% from 1.7% in January 2025 and 0.2% in December 2025, while the annual core rate stood at 11.2%.
Egypt has largely reined in inflation after it peaked at a record 38% in September 2023. The easing trend enabled the central bank to cut rates five times last year by a cumulative 725 basis points. Thursday’s move reinforces expectations that further rate reductions could follow if inflation continues on its projected path.
