Egypt's inflation rate stabilizes at 12.3%, and interest rate expectations remain unchanged
The latest data issued by the Central Agency for Public Mobilization and Statistics in Egypt showed a remarkable stability in the economic landscape, as the annual inflation rate for consumer prices in Egyptian cities stabilized at 12.3% during last December, the same rate recorded in November 2025. This stability reflects the success of the monetary and fiscal policies that were recently adopted in curbing prices that suffered from sharp fluctuations in previous years.
On a monthly basis, urban consumer prices rose slightly by 0.2% in December. Breaking down the index, the food and beverage group – the largest component of the Egyptian household's spending basket – showed mixed performance, rising by 1.5% year-on-year but falling by 0.7% month-on-month. This helped to mitigate direct inflationary pressures on citizens during the final month of the year.
The journey to recovery from peak inflation
To understand the significance of these figures, one must consider the recent historical context. The Egyptian economy has succeeded in significantly reducing inflation rates compared to the record high of 38% reached in September 2023. This gradual improvement was primarily supported by the massive $8 billion financial support package signed with the International Monetary Fund in March 2024, which played a pivotal role in restoring confidence in the economy and providing the necessary foreign currency liquidity to release goods and stabilize the exchange market.
Monetary policy and interest rates
In a related development, data from the Central Bank of Egypt revealed significant growth in the money supply (M2), which increased by 22.14% year-on-year in November, compared to 21.68% in October. Despite this increase, these rates remain considerably lower than the peak of 31.5% recorded in January 2023, indicating better control over liquidity and a resurgence of inflation.
In response to easing inflationary pressures and price stability, the Central Bank of Egypt adopted a more accommodative monetary policy to support economic growth. In December, the bank cut its overnight interest rate by 100 basis points to 21.00%. This decision brought the total interest rate cuts during 2025 to 725 basis points, a significant shift aimed at encouraging investment and reducing borrowing costs for the private sector.
Future outlook
Financial markets and economic circles are awaiting the Central Bank's Monetary Policy Committee meeting scheduled for February 12. This meeting will be crucial in reviewing overnight interest rates in light of recent data, determining whether the bank will continue its monetary easing cycle and lower interest rates, or opt to hold off in order to preserve current price stability gains.
