Egypt Holds Rates at 19% as Inflation Edges Higher on Base Effects

Egypt Holds Rates at 19% as Inflation Edges Higher on Base Effects

August 21, 2026
By Mintesinot Nigussie

Egypt’s central bank has left its key interest rates unchanged, keeping the overnight deposit rate at 19 percent despite a slight rise in annual inflation in July, as policymakers judged the increase to be largely driven by statistical base effects rather than renewed underlying price pressures.

The Monetary Policy Committee of the Central Bank of Egypt kept the overnight lending rate at 20 percent and the rate of its main operation at 19.5 percent. The discount rate was also maintained at 19.5 percent.

Annual headline inflation rose to 14.9 percent in July from 14.3 percent in June, while core inflation increased to 14.7 percent from 14.3 percent.

The central bank said the annual increase was mainly the result of unfavourable base effects. On a monthly basis, both headline and core inflation were unchanged in July, at 0.0 percent, with price developments showing broad stability and declines in some components.

The Monetary Policy Committee expects headline inflation to accelerate on average through the third quarter of 2026, partly because of base effects, before beginning a gradual decline in the first quarter of 2027.

Inflation is expected to converge towards the central bank's target of 7 percent, plus or minus two percentage points, during the second half of 2027.

The decision comes against a more uncertain global and regional economic backdrop. The central bank said geopolitical tensions had contributed to renewed volatility in energy markets and higher agricultural prices, while risks remained from tighter financial conditions and potential supply chain disruptions.

Domestic economic activity is also estimated to have moderated in the second quarter of 2026, according to the central bank's nowcast, following economic growth of 5 percent in the first quarter.

The Central Bank of Egypt expects real gross domestic product growth to average about 5 percent in the 2025/26 financial year. Output is expected to remain below potential before gradually converging towards it in the second half of 2027, limiting demand-driven inflationary pressures in the near term.

The Monetary Policy Committee said maintaining the current policy stance would preserve a sufficiently positive real interest rate margin, helping to anchor inflation expectations and support the projected decline in inflation.

The bank said it would continue to assess monetary policy in line with changes in economic conditions, the inflation outlook and the balance of risks, while remaining prepared to adjust rates to return inflation to its target.

Source: FSX Business News