Arab Finance: The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) decided to hold interest rates steady for the third consecutive time on Thursday, July 9th.
In this regard, the overnight deposit rate, overnight lending rate, and the rate of the main operation remain at 19%, 20%, and 19.50%, respectively. The discount rate was also maintained at 19.50%.
This decision reflects the committee’s assessment of current inflation dynamics and the evolving outlook since the previous MPC meeting.
The CBE noted that global economic activity continues to expand at a slower pace, weighed down by geopolitical tensions, trade policy uncertainty, and weak demand. Although inflation has continued to moderate across many economies, price pressures remain uneven, prompting central banks to maintain cautious monetary policies.
Meanwhile, energy prices have recently risen amid heightened geopolitical uncertainty after retreating from earlier conflict-driven peaks. On the other hand, agricultural commodity prices have moved in different directions due to varying supply and demand conditions.
Hence, the CBE warned that the global outlook remains vulnerable to renewed regional conflicts, tighter financial conditions, and supply chain disruptions.
The forecast shows that Egypt’s real gross domestic product (GDP) growth slowed modestly in the second quarter (Q2) of 2026, reflecting the impact of regional geopolitical tensions on economic activity, following growth of 5% in Q1.
The CBE expects the real GDP growth to average 5% in fiscal year (FY) 2025/2026, with output remaining below potential, though convergence to that level is expected by the first half (H1) of 2027, limiting demand-driven inflationary pressures.
Regarding inflation outturns, annual headline inflation in June 2026 eased to 14.3%, with monthly headline inflation declining markedly to negative 0.4%.
The annual core inflation edged up to 14.3% due to an unfavorable base effect, despite monthly dynamics decelerating to 0.3%from the previous month.
Both monthly headline and core readings are below their historical averages, reflecting the gradual dissipation of earlier seasonal shocks.
As for the outlook, the CBE’s forecasts indicate that annual headline inflation will accelerate through Q3 2026, though at a slower pace than projected during the May MPC meeting.
This assessment is backed by favorable exchange-rate developments as well as a broad-based decline in inflationary pressures. These developments will help mitigate unfavorable base effects in Q3 2026, after which inflation is expected to gradually decline and reach single digits, aligning with the targeted level of 7% (± 2 p.p.) in H2 2027.
