The Central Bank of Egypt maintains interest rates for the second consecutive meeting
At 19% for deposits and 20% for lending
Written by Ziad Abdel Fattah:
The Monetary Policy Committee of the Central Bank of Egypt decided at its meeting on Thursday, May 21, 2026, to maintain Interest rates The fundamentals remain unchanged. Accordingly, the overnight deposit and lending rates and the central bank's main operation rate were kept at 19.00%, 20.00%, and 19.50%, respectively. The credit and discount rate was also maintained at 19.50%.
This decision is consistent with the Committee’s view of the latest inflation developments and forecasts, in an uncertain external environment.
Global economic activity continues to grow
According to a statement from the Central Bank of Egypt, globally, economic activity continued to grow, albeit at a slight pace, amid ongoing geopolitical tensions, uncertainty in trade policies, and weak global demand.
Regarding inflation developments, recent increases have led central banks to adopt cautious monetary policies. As for commodities, energy markets have experienced some volatility, with Brent crude and natural gas prices rising sharply amid escalating geopolitical tensions that have impacted global energy supplies.
Meanwhile, agricultural commodity prices have been under upward pressure, driven in part by higher fertilizer costs following increased gas prices, along with rising international trade risk premiums.
Global prospects are vulnerable
Consequently, the global outlook remains vulnerable, particularly to escalating geopolitical tensions, supply chain disruptions, and adverse shifts in trade policies. Domestically, real GDP growth slowed slightly to 5.0% in the first quarter of 2026, compared to 5.3% in the fourth quarter of 2025.
It is also expected to slow further during the second quarter of 2026 due to the repercussions of the ongoing conflict in the region. Accordingly, the Central Bank of Egypt anticipates real GDP growth to reach approximately 5.0% during the 2025/2026 fiscal year, with output remaining below its maximum potential, which is expected to be reached by the first half of 2027.
The current trajectory of the output gap suggests that demand-side inflationary pressures will remain limited in the short term, given the monetary policy adopted during the forecast period. On the labor market side, the unemployment rate registered 6.0% in the first quarter of 2026, compared to 6.2% in the previous quarter.
Slowing inflation
Regarding inflation developments in April 2026, there was a slight slowdown, with the annual headline inflation rate declining to 14.9% from 15.2% in March 2026, and the annual core inflation rate also decreasing to 13.8% from 14.0% during the same period. On a monthly basis, the slowdown in headline inflation is attributed to a significant decrease in food inflation, which offset the seasonal increase seen in the previous month.
Non-food inflation also stabilized at its recent levels, which can be explained by the fact that the impact of the March 2026 energy price adjustments was temporary, preventing a wider inflationary fallout. Looking ahead, the annual headline inflation rate is expected to accelerate through the third quarter of 2026, partly due to unfavorable base effects, as well as supply pressures stemming from the ongoing conflict and subsequent exchange rate movements and fiscal consolidation measures.
The annual inflation rate may exceed the target.
The annual rate of headline inflation is likely to exceed its target of 7% (±2 percentage points) on average during the last quarter of 2026, before gradually slowing down in the first quarter of 2027 and converging towards this target during the second half of 2027.
This path will be supported by monetary tightening, along with ongoing assessment of the sources of price pressures and monthly inflation trends, consolidation of inflation expectations, and a firm commitment to a flexible exchange rate. However, the projected inflation trajectory remains subject to upside risks, including the possibility of a prolonged conflict and the effects of fiscal consolidation measures exceeding expectations.
Keeping key interest rates unchanged
In light of the above, the Monetary Policy Committee decided to maintain key interest rates unchanged, basing its decision in part on the factors fueling inflationary pressures and actual inflation developments, particularly given the prevailing uncertainty. This approach allows for an assessment of the spillover effects of the current supply shock and its impact on inflation developments, especially considering the positive margin in the real interest rate over the forecast horizon.
The committee continues to evaluate its decisions to help bring inflation closer to its target level during the second half of 2027, taking into account developments in economic conditions, the expected inflation trajectory, and the risks surrounding it.
