CBE slashes key interest rates by 225 bps

Updated 4/17/2025 7:46:00 PM

Arab Finance: The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) has trimmed its key policy rates by 225 basis points, bringing the overnight deposit rate to 25.00%, the overnight lending rate to 26.00%, and the rate of the main operation to 25.50%, the CBE stated on April 17th.

The discount rate was also lowered by 225 basis points to 25.50%.

The decision comes as inflation in Egypt cooled markedly in the first quarter (Q1) of 2025, with headline inflation dropping to 13.6% in March from 33.7% in December 2024.

The committee noted that the current monetary stance had become significantly tighter following the rapid disinflation in Q1, creating sufficient space to initiate an easing cycle.

However, the MPC emphasized that it would maintain a cautious approach, adjusting the pace and magnitude of future rate cuts based on evolving data and risks.

Despite the recent moderation, the MPC acknowledged that inflation remains exposed to upside risks, including the impact of ongoing fiscal consolidation, the pass-through of planned fiscal measures, geopolitical tensions, and uncertainties surrounding global trade, particularly the repercussions of the China-US trade war.

Domestically, economic activity showed signs of sustained recovery for the fourth consecutive quarter, with Q1 2025 growth surpassing the 4.3% recorded in Q4 2024.

Growth was mainly supported by non-petroleum manufacturing, trade, and tourism. Yet, the output gap indicates that the economy is still operating below its full potential, although it is projected to close by the end of fiscal year 2025/26.

The CBE added that the current estimates of the output gap support the disinflation outlook in the short term, as demand-side pressures remain contained under the prevailing monetary stance.

Globally, the MPC highlighted that several advanced and emerging market central banks continue to adopt a cautious policy stance amid persistent uncertainty over growth and inflation.

Falling oil prices, volatile grain markets, and weaker global demand remain key concerns, while geopolitical risks and trade disruptions continue to influence inflation trajectories.

The MPC reaffirmed its commitment to achieving price stability and steering inflation towards its 7% (±2 percentage point) target by the fourth quarter (Q4) of 2026.

It will continue to assess its policy direction on a meeting-by-meeting basis, using all available tools to respond to evolving economic and financial conditions.