CAIRO — The Central Bank of Egypt (CBE) kept its benchmark interest rates unchanged on Thursday after new data showed annual urban consumer inflation eased modestly to 14.3% in June, reinforcing expectations that policymakers may resume their monetary easing cycle later this summer if disinflation continues.
According to the Central Agency for Public Mobilisation and Statistics (CAPMAS), annual urban inflation slowed from 14.6% in May, while consumer prices declined 0.4% month-on-month, marking one of the few monthly contractions recorded this year. The decline was driven primarily by a 3.2% month-on-month fall in food and non-alcoholic beverage prices, reflecting improved seasonal agricultural supplies and lower prices for several staple food items.
The inflation data was released shortly before the Central Bank’s Monetary Policy Committee (MPC) announced it would leave the overnight deposit rate at 19.0%, the overnight lending rate at 20.0%, and the main operation and discount rates at 19.5%, maintaining a cautious monetary stance as inflation remains above target despite its gradual moderation.
Food Prices Drive the Latest Improvement
Food inflation has been the principal contributor to Egypt’s consumer price dynamics over the past two years, making June’s decline particularly significant.
Lower prices for vegetables, fruit and several food staples helped offset persistent inflationary pressures across housing, utilities, healthcare, transport and other service sectors, where price increases continue to reflect higher production costs, fiscal reforms and earlier energy price adjustments.
While the latest figures provide welcome relief for households, economists note that the improvement remains largely concentrated in food prices, suggesting that underlying inflationary pressures have yet to fully subside.
Monetary Policy Remains Cautious
The MPC’s decision to leave interest rates unchanged was broadly anticipated by financial markets.
In its policy statement, the Central Bank cited continued geopolitical uncertainty, volatile global commodity markets and inflation that remains well above the Bank’s medium-term target as reasons for maintaining a restrictive monetary policy stance.
The decision also reflects policymakers’ preference to assess the durability of the current disinflation trend before implementing further reductions in borrowing costs.
By maintaining interest rates, the Central Bank continues to preserve positive real returns on Egyptian pound assets, supporting domestic savings while helping sustain foreign portfolio inflows into local debt markets at a time when global capital flows remain highly sensitive to geopolitical developments and interest-rate expectations.
August Rate Cut Increasingly Likely
Although Thursday’s meeting resulted in no policy change, market participants increasingly expect the Central Bank to resume its rate-cutting cycle during the August MPC meeting, provided inflation continues to moderate and external risks do not intensify.
Since beginning its monetary easing cycle earlier this year, the Central Bank has consistently emphasised that future policy decisions will remain data dependent, balancing support for economic growth against the need to firmly anchor inflation expectations.
The June inflation figures strengthen the argument for cautious easing, although policymakers are expected to await additional confirmation that inflation is moving sustainably lower before reducing interest rates further.
Investors Focus on Underlying Inflation
Beyond the headline decline, investors will closely monitor core inflation, exchange-rate stability and the impact of future administered price adjustments.
Potential increases in domestic fuel prices, electricity tariffs and public service charges during the second half of the year could temporarily interrupt the pace of disinflation, while developments in global energy markets and regional geopolitical tensions remain important upside risks.
Nevertheless, continued moderation in food inflation would provide an important buffer against broader price pressures and support consumer purchasing power.
Economy Continues Disinflation Path
Egypt has made significant progress in bringing inflation down from the exceptionally elevated levels experienced during the inflationary surge of 2023 and early 2024. Nevertheless, 14.3% remains well above the Central Bank’s medium-term inflation objective, indicating that monetary policy is likely to remain restrictive even if gradual rate reductions resume later this year.
The latest data also reflects improving macroeconomic stability following the implementation of wide-ranging economic reforms, greater exchange-rate flexibility and continued fiscal consolidation, although policymakers continue to balance inflation control with supporting private-sector investment and economic growth.
What Markets Will Watch Next
Attention now turns to several key indicators that will shape the Central Bank’s next policy decision:
- July inflation data and the trajectory of core inflation.
- Any adjustments to domestic fuel and electricity prices.
- Global oil and commodity price movements amid regional geopolitical tensions.
- Exchange-rate stability and foreign portfolio investment flows.
- Second-quarter economic growth and private-sector activity indicators.
If inflation continues its gradual downward trajectory and external conditions remain broadly stable, economists expect the Central Bank to resume a measured easing cycle beginning in August, providing additional support for investment and credit growth while maintaining its commitment to long-term price stability.
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