The Monetary Policy Committee of the Central Bank of Egypt (CBE) decided to raise key interest rates by 100 basis points. The overnight deposit rate, overnight lending rate and the rate of the CBE's main operation were therefore raised to 20.0%, 21.0% and 20.5%, respectively, and the credit and discount rate was raised to 20.5%. The decision comes amid an unfavourable external environment and rising uncertainty, and aims to anchor expectations and keep inflation on its downward path.

Globally, economic activity has shown a degree of resilience, supported by continued growth in trade and investment, particularly in technology-related sectors, although geopolitical tensions and uneven growth across economies continue to weigh on the economic landscape. At the same time, commodity markets have seen broad-based price increases, especially in energy and agricultural commodities, driven by escalating regional tensions and the resulting disruption to supply chains. Inflationary pressures remain generally elevated, though they vary across economies, prompting central banks to tighten monetary policy. Overall, the global economic outlook remains exposed to the risk of rising uncertainty, given the possibility of persistent geopolitical tensions, further tightening of financial conditions and disruption to global trade and supply chains.

Domestically, the CBE's preliminary estimates indicate that real GDP growth was broadly stable in the third quarter of 2026, close to the 4.7% growth rate recorded in the second quarter of the same year. This reflects continued growth in activity in key sectors, notably manufacturing, services and trade, despite ongoing geopolitical tensions in the region. However, output remains below its full capacity, although it is expected to approach it by the second half of 2027. Demand-side inflationary pressures are therefore likely to remain limited in the short term, thanks to the prevailing restrictive monetary conditions.

On inflation, monthly headline and core inflation accelerated in September 2026 to 1.3% and 0.8%, respectively, compared with August 2026. Specifically, the rise in monthly core inflation reflected higher prices of basic food items and their seasonal developments. Although non-food inflation eased on a monthly basis, its level remains generally elevated. Meanwhile, annual headline and core inflation continued on their downward path, falling to 13.9% and 14.1%, respectively, in September 2026, supported by stable monthly inflation rates from June to August 2026.

On the outlook, heightened risks and uncertainty compared with the previous Monetary Policy Committee meeting have weighed on global economic and financial conditions. Further anchoring inflation expectations and keeping inflation on its downward path therefore requires a more restrictive monetary policy, with the aim of achieving the inflation target of 7% (± 2 percentage points) on average in the fourth quarter of 2027. These expectations nonetheless remain subject to a range of risks, chief among them rising global uncertainty should the regional conflict last longer than initially expected, and its impact on global prices of energy and other commodities, fuelling imported inflation. The risks also include tighter global financial conditions and the possibility that the impact of domestic fiscal consolidation measures exceeds expectations.

In light of the above, and taking the surrounding risks into account, the Monetary Policy Committee judged that raising the CBE's key interest rates by 100 basis points is necessary to strengthen the degree of monetary tightening, helping to further anchor inflation expectations and contain potential inflationary pressures. This pre-emptive decision aims to keep inflation on its downward path and ensure it reaches its target of 7% (± 2 percentage points) on average in the fourth quarter of 2027. The committee will continue to assess the monetary policy stance based on economic developments, the expected inflation path and the surrounding risks, and reaffirms its commitment to taking the necessary measures to preserve price stability and ensure inflation returns to its target in the near term.