Central Bank of Egypt cuts rates for first time in nearly five years in April

CBE kickstarts its loosening cycle: At its meeting on 17 April, the Monetary Policy Committee of the Central Bank of Egypt (CBE) slashed the overnight deposit, overnight lending and the main operations rates by 225 basis points to 25.00%, 26.00% and 25.50%, respectively. The reduction, the first since 2020, was more aggressive than markets had anticipated and followed a cumulative 1,900 basis points of increases since March 2022.

Under-control inflation drives cut: The key driver behind the cut was a steep slowdown in both headline and core inflation through March, when the latter hit a near three-year low; past interest rate increases, a high base of comparison and the fading effect of supply-side shocks have contributed to the moderation in inflation. Moreover, the CBE is confident that subdued demand-side pressure on prices due to still-elevated interest rates will continue to support the slowdown in inflation this year and in 2026. Regarding economic activity, the CBE hinted that GDP growth in January–March 2025 could have surpassed the prior three months’ 4.3% annual expansion—in line with our Consensus.

The CBE’s loosening cycle is only getting started: The Central Bank of Egypt provided no explicit forward guidance, but it called for caution as it reminded that upside risks to inflation remain, namely uncertainty over the impact of the U.S.–China trade war and regional geopolitical conflicts. Virtually all of our panelists see more cuts by December 2025, albeit with a relatively wide spread of 175–900 basis points worth of additional reductions. The Bank will reconvene on 22 May.

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