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The Monetary Policy Committee of the Central Bank of Egypt announced on August 20 that it had decided to keep its key policy rates unchanged with the overnight deposit rate remaining at 19.0 percent the overnight lending rate at 20.0 percent the main operation at 19.5 percent and the discount rate at 19.5 percent. This decision followed the committee’s review of inflation dynamics and the economic outlook since its July meeting according to the bank’s press release. The hold maintains a positive real interest rate that the MPC judged necessary to anchor expectations while supporting the projected path for disinflation.
Central Bank of Egypt figures show that annual headline inflation edged up to 14.9 percent in July 2026 from 14.3 percent in June while core inflation rose to 14.7 percent from 14.3 percent over the same period. Both monthly headline and core readings registered zero percent in July falling below expectations and pointing to broad stability with some items even recording price declines. The MPC statement indicated that these outturns suggest the effects of earlier shocks are dissipating and were largely transitory in nature.
According to the committee’s assessment annual headline inflation is projected to accelerate on average through the third quarter of 2026 because of unfavorable base effects yet at a more moderate pace than forecast in July. Inflation is then expected to decline gradually from the first quarter of 2027 eventually converging toward the target of 7 percent plus or minus two percentage points during the second half of that year. The disinflation process will draw support from the prevailing tight monetary stance recent easing in underlying month-on-month pressures and cooling across broad CPI components the press release added.
The Central Bank of Egypt nowcast estimates a further moderation in real economic activity for the second quarter of 2026 after growth stood at 5.0 percent in the first quarter. Real GDP is forecast to average around 5.0 percent for fiscal year 2025/26 with output remaining below potential although it is expected to converge toward potential by the second half of 2027. This output gap trajectory implies that demand-pull inflationary pressures will stay limited in the near term aided by the current monetary policy setting.
In its statement the MPC described global economic activity as having moderated under the weight of geopolitical volatility and subdued demand with inflation still elevated but uneven across economies. Central banks have therefore adopted divergent policy paths tailored to local conditions while energy and agricultural commodity prices have faced renewed upward pressure and volatility from regional tensions and adverse weather. The global outlook remains clouded by risks that include prolonged conflicts tighter financial conditions and potential supply-chain disruptions the committee noted.
The MPC highlighted upside risks to its inflation forecast that include any escalation in regional hostilities and a stronger-than-expected pass-through from fiscal consolidation measures. It will continue evaluating the monetary stance in light of incoming data on economic conditions the inflation trajectory and the balance of risks. The committee affirmed it stands ready to adjust policy to ensure inflation returns to target over the forecast horizon according to the August 20 press release.
