Egypt’s central bank holds interest rates steady as inflation outlook remains under review

CAIRO - 20 August 2026: The Central Bank of Egypt (CBE) left its benchmark interest rates unchanged on Thursday, as policymakers weigh rising annual inflation against signs of easing monthly price pressures and continued uncertainty from regional tensions.

 

Following its Monetary Policy Committee meeting, the CBE kept the overnight deposit rate at 19 percent, the overnight lending rate at 20 percent, and the main operation rate at 19.5 percent. The discount rate also remained unchanged at 19.5 percent.

 

The decision maintains the central bank’s current monetary stance as it seeks to bring inflation back toward its medium-term target while supporting economic activity.

 

Egypt’s annual headline inflation increased to 14.9 percent in July, compared with 14.3 percent in June, while core inflation rose to 14.7 percent from 14.3 percent.

 

Despite the annual increase, the CBE said monthly headline and core inflation both registered zero percent in July, below expectations.

 

The central bank attributed the rise in annual inflation largely to unfavorable base effects and said the latest monthly figures indicate that the impact of earlier price shocks is gradually fading.

The CBE expects headline inflation to rise further during the third quarter of 2026, although the increase is now expected to be less pronounced than forecast at its previous meeting.

 

Inflation is projected to begin declining again from the first quarter of 2027 and reach the CBE’s target range of 7 percent ±2 percentage points in H2 2027.

 

On economic activity, the CBE said its forecast points to another moderation in real activity during the second quarter of 2026, following 5 percent real GDP growth in Q1.

 

The central bank expects average real GDP growth to reach around 5 percent during FY2025/26.

 

Economic output is expected to remain below potential in the near term before gradually moving toward potential by the second half of 2027. The resulting output gap is expected to keep demand-driven inflationary pressures contained in the short term.

 

The CBE pointed to heightened global uncertainty, with economic activity moderating amid geopolitical volatility and weaker demand.

 

Energy prices have faced renewed upward pressure and increased volatility as regional tensions escalate, while agricultural prices have also risen amid supply concerns linked to geopolitical developments and adverse weather.

 

For Egypt, the central bank identified renewed regional hostilities and a higher-than-expected impact from fiscal consolidation measures as key upside risks to inflation.

 

The MPC said maintaining current rates preserves a sufficiently positive real interest-rate margin, helping anchor inflation expectations and support the expected disinflation path.

 

The committee will continue to monitor economic developments, the inflation outlook and the balance of risks before making future policy decisions.

 

The CBE reiterated that price stability remains its primary objective and said it remains prepared to adjust monetary policy when necessary to bring inflation back toward target.