Egypt Keeps Key Interest Rates Unchanged for Fourth Time

The Central Bank of Egypt kept its benchmark deposit rate at 19% and its lending rate at 20% for the fourth consecutive policy meeting, pausing for longer as inflation picks up and the regional war drags on.

The decision came after consumer-price growth accelerated and the outlook for an early end to the Iran war worsened, which has strained Egypt’s currency and its spending on fuel imports. All six economists surveyed by Bloomberg had expected the hold.

What’s Behind the Pause

Egypt had been cutting rates for nearly a year before pausing that cycle in late February, when the U.S.-Israeli military campaign against Iran began. A June peace effort fell apart, and a new U.S. plan for economic pressure against Iran, announced by President Donald Trump, has further raised uncertainty in the region.

Before the pause, the central bank had moved gradually to unwind an earlier tightening cycle as inflation cooled. The country’s finances have become more dependent on external support, and both the IMF and EU have stepped in to fill hard-currency gaps. That support, however, does not remove the underlying strain from higher fuel import costs and weaker currency pressure.

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Egypt, the most populous nation in the region, has largely avoided a sharp inflation spike during the conflict. Annual consumer-price inflation quickened in March, then slowed in April and June, but accelerated anew in July to 14.9% – less than many economists had projected. On a monthly basis, prices were flat.

The conflict has strained Egypt’s public finances because import costs have increased and revenue from maritime trade has fallen amid route disruptions. The central bank has also had to manage a weaker currency, which raises import costs. This backdrop has made policymakers cautious about easing monetary policy too quickly, especially with the regional outlook so uncertain.

What Happens Next

Economists at Goldman Sachs Group Inc. and Abu Dhabi Commercial Bank expect the central bank to keep rates steady for the rest of 2026 and then begin easing again in the first three months of 2027.

“Policymakers are likely to wait for greater confidence that inflation is on a sustained path towards the target and that external financing conditions remain supportive,” said Monica Malik, chief economist at ADCB, ahead of the decision.

The central bank’s inflation target is 7%, with a tolerance of plus or minus two percentage points, to be reached in the latter half of 2027.

The Support Behind the Economy

The International Monetary Fund approved about $1.8 billion in financing last month after Egypt completed the penultimate review of its enlarged program, which now totals $8 billion. In addition, the European Commission disbursed €1.5 billion (about $1.73 billion) to Egypt as part of a €4 billion macro-financial assistance arrangement.

The pause in rate cuts reflects a broader strategy to anchor inflation expectations while relying on external financing to support the currency. Egypt’s economy remains heavily exposed to global food and energy prices, so the central bank is likely to keep rates elevated until there is clearer evidence that price pressures are fading for good.

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