Egypt Cuts Interest Rates by 200 Basis Points as Inflation Falls

The Egypt’s central bank has resumed its interest rate-cutting cycle, slashing overnight rates by a sharper-than-expected 200 basis points on Thursday, August 28, 2025.

This marks the third reduction in 2025, as cooling inflation and stronger growth encouraged policymakers to prioritize economic expansion.

The Monetary Policy Committee (MPC) set the deposit rate at 22% and the lending rate at 23%, highlighting the government’s push to support investment and recovery.

Economists had anticipated a smaller cut of 100 basis points, underscoring the central bank’s aggressive stance.

Growth Strengthens Amid Lower Inflation

Egypt’s economy grew by a preliminary 5.4% in the second quarter, up from 4.8% in the first quarter, driven by increased tourism and a rebound in manufacturing, according to the MPC statement.

The central bank noted that the decision reflects an updated view on “inflation dynamics and the outlook” since its last meeting in July.

Official data showed headline inflation slowed to 13.9% in July, down from 14.9% in June and well below its peak of 38% in September 2023. Policymakers expect inflation to continue declining over the next year.

Recent Monetary Policy Moves

The latest cut follows earlier reductions of 225 basis points in April and 100 basis points in May.

These came after the bank kept rates steady for a year following a steep 600 basis-point hike in March 2024, when it also allowed the Egyptian pound to depreciate by nearly 50% against the US dollar.

The central bank paused its easing cycle in July due to a temporary inflation uptick.

Gulf Investments Bolster Recovery

Economist Nasser Saidi said that regional support—particularly from Gulf states through joint ventures, sovereign wealth fund contributions, and multi-billion-dollar partnerships—has played a key role in stabilizing Egypt’s economy and boosting growth prospects.

The Egyptian government has pledged to attract further Gulf investment as it works to sustain the downward inflation trend. This strategy follows years of foreign currency shortages that crippled the economy and forced Cairo to secure an expanded $8 billion IMF loan.

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