CBE slashes key interest rates by 100 basis points in final 2025 meeting

Updated 12/25/2025 8:08:00 PM

Arab Finance: The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) decided to cut its key policy rates by 100 basis points at its final meeting of 2025, citing its assessment of inflation developments and the economic outlook, as per a statement issued on December 25th.

The committee lowered the overnight deposit rate to 20%, the overnight lending rate to 21%, and the rate of the main operation to 20.50%.

The discount rate was also reduced to 20.50%.

The decision reflects developments since the previous MPC meeting, particularly the recent inflation trends.

Globally, economic growth has remained relatively steady, although the outlook continues to be affected by trade uncertainty, geopolitical tensions, and slower demand growth.

Inflation trends have been broadly stable, with central banks in advanced and emerging market economies maintaining a cautious approach and pursuing gradual monetary easing.

In commodity markets, oil prices moderated as supply exceeded demand, while agricultural prices followed mixed paths, with risks linked to potential supply-chain disruptions and geopolitical developments.

Domestically, the CBE’s nowcast for the fourth quarter (Q4) of 2025 points to a slight moderation in growth, with real gross domestic product (GDP) growth expected to be around 5%, compared to 5.3% in the previous quarter.

Growth in Q3 of 2025 was driven mainly by non-petroleum manufacturing, trade, and communications.

Despite the moderation, the current output trajectory is expected to support the short-term disinflation path, with demand-side inflationary pressures remaining contained under the current monetary stance.

The CBE expects annual headline inflation to stabilize near current levels in Q4 of 2025, averaging around 14% for the year, down from 28.3% in 2024.

Inflation is projected to continue declining in 2026, converging toward the Bank’s target range by Q4 of 2026.

This outlook remains subject to risks, including persistent non-food inflation, the impact of fiscal measures, and global geopolitical tensions.

Based on these factors, the MPC said a 100-basis-point reduction in policy rates is consistent with maintaining a monetary stance that supports the disinflation path while anchoring inflation expectations.

The committee added that future decisions on the pace and scale of monetary easing will depend on economic developments, incoming data, and the balance of risks, reiterating its readiness to adjust policy tools as needed to guide inflation toward its target of 7%, plus or minus 2 percentage points, on average by Q4 of 2026.