While many economists expected Egypt’s central bank to play it safe with a modest rate cut, the monetary authority had other plans entirely. On December 25, 2025, the Central Bank of Egypt surprised everyone by slashing interest rates by a full percentage point, bringing the overnight deposit rate down to 20.0%. Think of it like turning down the heat when your house finally starts cooling off.
This bold move marks the fifth rate cut this year, adding up to a whopping 625 basis points of reductions since January. For context, that’s like going from paying $625 extra on a loan to paying nothing extra at all. The central bank clearly feels confident that inflation is heading in the right direction.
The numbers back up their optimism. Annual inflation dropped to 12.3% in November from 12.5% in October, while food prices cooled considerably. Food inflation fell to just 0.7% in November compared to 1.5% the month before. When people spend less on groceries relative to their income, it’s usually good news for the overall economy.
Most analysts had predicted a smaller 50 basis point cut, making this decision twice as aggressive as expected. It’s the first time Egypt has cut rates in four and a half years, ending a period where borrowing costs stayed high to fight stubborn inflation. These rates have now reached their lowest since January 2024. The lending rate was also decreased to 21% alongside the deposit rate reduction.
Looking ahead, experts remain cautiously optimistic. EFG Holding predicts rates could fall another 600-700 basis points in 2026, potentially reaching 15%. They also forecast inflation averaging 8-10% by the end of next year. The National Bank of Egypt expects similar results with inflation settling around 10-11%. Like other central banks worldwide, Egypt’s monetary authority operates through the interest rate channel, where lower borrowing costs stimulate economic activity by making loans cheaper for businesses and consumers.
The central bank aims to bring inflation back to its target range of 5-9% by late 2026 while maintaining economic growth around 5%. Real interest rates currently sit at about 8.5%, giving policymakers room to cut further without losing control of prices.
This assertive approach signals that Egyptian officials believe their inflation fight is working. However, they’ll keep watching the data closely, ready to adjust if global tensions or other surprises threaten their progress.
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