{"id":17560,"date":"2025-05-17T12:27:16","date_gmt":"2025-05-17T10:27:16","guid":{"rendered":"https:\/\/zawia3.com\/?p=17560"},"modified":"2026-10-24T15:05:58","modified_gmt":"2026-10-24T13:05:58","slug":"cbe","status":"publish","type":"post","link":"https:\/\/zawia3.com\/en\/cbe\/","title":{"rendered":"Inflation, Debt and Hot Money: Will Egypt Cut Interest Rates Again?"},"content":{"rendered":"

Amid the rise in Egypt’s core inflation rate to 10.4% in April 2025, compared with 9.4% in March, markets and citizens are awaiting the decision of the Monetary Policy Committee of the Central Bank of Egypt, expected to be issued on Thursday 22 May, to determine the path of interest rates in the coming period, whether by proceeding with a new cut or settling for holding them temporarily to monitor the economic impact.<\/span><\/p>\n

Last April, the Central Bank had cut key interest rates by 225 basis points, bringing the overnight deposit rate to 25%, the lending rate to 26%, and the main operation rate and the discount rate to 25.5%. It explained in its statement that the decision came as a result of slowing inflation rates, as the annual headline rate fell to 13.6% in March 2025 after peaking at 38% in September 2023, while annual inflation for non-food goods also fell from 25.7% to 18.9% year on year over the same period.<\/p><\/blockquote>\n

The Central Bank indicated that monthly inflation developments had begun to return to their historically usual levels, considering that current indicators allow for supporting economic activity and easing the burden of public debt, especially with the improvement in net foreign assets and the rise in monetary reserves.<\/span><\/p>\n

On the other hand, the International Monetary Fund expressed its reservations about this direction, considering the cut a premature step that could expose the country to the risk of a return of inflation, especially amid continuing global economic shocks. Jihad Azour, director of the IMF’s Middle East and Central Asia Department, warned against rushing to adjust monetary policy without strict controls. This cut is considered the first downward adjustment since 2020, after a series of decisions to hold and raise rates adopted by the Central Bank of Egypt in recent years.<\/span><\/p>\n

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Recommended reading: The bleeding of Egypt’s economic authorities: the government subsidises losses and neglects reform<\/a><\/strong><\/p>\n

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The path of the interest rate in recent years<\/b><\/h1>\n

Monetary policy in Egypt has taken a volatile path in recent years, as the Central Bank sought to adapt to waves of inflation and to local and global economic crises. Since the decision to liberalise the pound’s exchange rate in November 2016, the bank embarked on an intensive cycle of interest rate hikes aimed at curbing acute inflation, bringing the deposit rate to 14.75% and the lending rate to 15.75% in November 2016, then to 18.75% and 19.75% in July 2017, a total increase of 4% during 2017.<\/span><\/p>\n

Later, the Central Bank moved towards monetary easing, with interest rates cut gradually in 2019 and 2020, before the rate settled at 8.25% for deposits and 9.25% for lending throughout 2021. But with mounting economic pressures and inflation worsening again, the Central Bank began a new cycle of interest rate hikes from 2022, which peaked in 2024, when the deposit rate rose to a record level of 27.25%, driven by an inflation rate exceeding 30%.<\/span><\/p>\n

In a pivotal step, in April 2025 the Central Bank of Egypt took a decision to cut interest rates by 225 basis points in one go, based on a marked decline in annual headline inflation, which reached 13.6%. This decision is seen as the start of a possible easing cycle extending until the end of the year, amid estimates that the additional cuts will range between 400 and 600 basis points, according to the forecasts of financial institutions and analysts.<\/span><\/p>\n

The attached charts show the development of deposit and lending interest rates in Egypt over the period from 2016 to 2025, highlighting the major shifts that accompanied each stage of monetary policy.<\/span><\/p>\n

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Overnight deposit rate in Egypt, 2016 to 2025<\/figcaption>

Overnight deposit rate at the end of each year, 2025 after the 17 April decision<\/p>

<\/div>
<\/div>
Year<\/th>Deposit rate<\/th><\/tr><\/thead>
2016<\/td>14.75%<\/bdi><\/td><\/tr>
2017<\/td>18.75%<\/bdi><\/td><\/tr>
2018<\/td>16.75%<\/bdi><\/td><\/tr>
2019<\/td>12.25%<\/bdi><\/td><\/tr>
2020<\/td>8.25%<\/bdi><\/td><\/tr>
2021<\/td>8.25%<\/bdi><\/td><\/tr>
2022<\/td>16.25%<\/bdi><\/td><\/tr>
2023<\/td>19.25%<\/bdi><\/td><\/tr>
2024<\/td>27.25%<\/bdi><\/td><\/tr>
2025<\/td>25.00%<\/bdi><\/td><\/tr><\/tbody><\/table><\/div>
Central Bank of Egypt, Monetary Policy Committee decisions \u00b7 The CBE raised the rate to 21.25% on 1 February 2024 and to 27.25% on 6 March 2024<\/span>