Egypt raises rates 100 basis points, ends monetary easing cycle
Egypt's central bank raised rates by 100 basis points, lifting the deposit rate to 20% and the lending rate to 21%, the first increase since March 2024.
The Central Bank of Egypt raised its main interest rates by 100 basis points, setting the overnight deposit rate at 20% and the lending rate at 21%, while the main operation rate and the discount rate reached 20.5% each. The decision came at the end of the Monetary Policy Committee meeting and was the first increase since March 2024, after five consecutive meetings in which the committee left rates unchanged on 24 September, 20 August, 9 July, 21 May and 2 April.
The committee said the increase was a preemptive move aimed at anchoring inflation expectations and preserving the downward path toward a target of 7% with a tolerance band of two percentage points on average in the fourth quarter of 2027, amid an unfavorable external environment, rising uncertainty and geopolitical tensions that pushed commodity and energy prices higher.
Domestically, preliminary central bank estimates put real gross domestic product growth near 4.7% in the third quarter of 2026, with output still below full capacity and expectations of approaching it in the second half of 2027, while monthly core inflation rose to 0.8% in September and annual inflation slowed to 13.9% and core inflation to 14.1%.
Banking expert Mohamed Abdel Aal described the decision as a surprise that contradicted the expectations of most market participants, and said it meant the central bank was no longer heading toward a monetary easing cycle but had adopted a preemptive stance to address emerging inflation risks, aiming to support exchange rate stability and protect foreign investments in local debt instruments.
What do these terms mean?
Basis points: A small unit for measuring changes in interest rates, where 100 basis points equal 1%.
Overnight deposit rate: The interest the central bank pays banks on funds they deposit with it for one day.
Monetary easing: A policy in which the central bank lowers interest rates to encourage borrowing and spending.
Core inflation: The inflation rate after excluding the most volatile items such as food and fuel, to measure the underlying trend of prices.
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