Egypt's central bank holds rates as annual inflation eases to 13.9 per cent

The Central Bank of Egypt kept its key policy rates unchanged on 24 September, the Monetary Policy Committee press release said. Annual urban headline inflation eased to 13.9 per cent in September from 14.5 per cent in August, the central bank said.

The decision left the overnight deposit rate at 19.00 per cent, the overnight lending rate at 20.00 per cent, the rate of the main operation at 19.50 per cent and the discount rate at 19.50 per cent. The bank's decisions page lists the current rates as effective from 15 February 2026, and the inflation figures were published on 10 and 11 October.

What the committee said

The committee said annual headline inflation eased marginally to 14.5 per cent in August, driven by lower food prices that offset increases in electricity tariffs and housing rents. Annual core inflation was 14.9 per cent. Monthly headline inflation was negative 0.4 per cent in June, 0.0 per cent in July and 0.1 per cent in August, the press release showed.

Because those readings were more favourable than expected, the bank revised its inflation forecast down from the August meeting. It expects annual headline inflation to stabilise on average in the third quarter of 2026 and then decelerate gradually towards its target of 7 per cent, plus or minus two percentage points, during the second half of 2027, the release said.

The committee described the balance of risks as tilted to the upside. It pointed to a resurgence of regional hostilities and to a possible higher-than-expected pass-through from fiscal consolidation measures and international food prices if global energy prices stay elevated for long. It said the current degree of restrictiveness acts as a buffer and that it "stands ready to deploy all available policy tools to ensure price stability".

September data and growth

The September inflation figures were mixed beneath the headline. Monthly urban headline inflation was 1.3 per cent, against 0.1 per cent in August 2026 and 1.8 per cent in September 2025, and annual headline inflation was 13.9 per cent, the release showed. The annual rate fell because the comparison month a year earlier had a larger monthly increase. Monthly core inflation, computed by the central bank, was 0.8 per cent against 0.3 per cent in August, and annual core inflation was 14.1 per cent against 14.9 per cent. The bank scheduled its monthly inflation note for 15 October.

Growth is moderating. Real GDP growth was 4.7 per cent in the second quarter of 2026, down from 5.0 per cent in the first quarter, mainly because of the effect of regional tensions, and averaged 5.1 per cent in the 2025/26 fiscal year, the committee said. It expects growth to stay broadly stable near that level in 2026/27 and output to converge towards potential in the second half of 2027, which it said implies limited demand-side inflationary pressure in the short term.

External position and the Gulf link

Net international reserves were $57,348.2 million at the end of September on a provisional basis, the central bank said. The balance of payments recorded a surplus of $2.8 billion in the 2025/26 fiscal year, with net inflows on the capital and financial account of $23.2 billion and a current account deficit of $22.5 billion, the bank reported on 12 October.

Remittances from Egyptians working abroad rose 27.2 per cent to a record of about $33.9 billion in the first eight months of 2026, from about $26.6 billion a year earlier, and were about $4.2 billion in August alone, up 21.7 per cent, the bank's release of 13 October showed.

On 29 September the central banks of the United Arab Emirates and Egypt renewed their currency swap between the dirham and the Egyptian pound for five years. The agreement has a nominal value of AED 5 billion, equivalent to EGP 69 billion, the Central Bank of Egypt said. Both governors said the arrangement supports the use of local currencies in bilateral trade and financial settlements.