Egypt cuts interest rates by 1% for the fifth time in 2025: Details and implications
In a move reflecting the success of recent economic policies and the stability of macroeconomic indicators, the Monetary Policy Committee of the Central Bank of Egypt decided, at its final meeting of 2025 held today, Thursday, to reduce key interest rates by 100 basis points (1%). This decision reinforces the monetary easing policy pursued by the bank throughout the year, aimed at boosting production and supporting the private sector.
New interest rates after the reduction
Based on this decision, the interest rate structure was adjusted as follows: the overnight deposit rate decreased to 20%, the overnight lending rate decreased to 21%, while the main operation rate and the credit and discount rate were both set at 20.50%. These levels are encouraging compared to the beginning of the year, paving the way for a more attractive investment environment.
The harvest of monetary easing in 2025
The year 2025 is considered a turning point in Egyptian monetary policy, as this cut is the fifth of its kind. In total, interest rates have fallen by 725 basis points (7.25%) since January, distributed across key milestones: a sharp 225-basis-point cut in April, 100 points in May, 200 points in August, 100 points in October, culminating in the current December cut, following a brief period of stability in November.
An analysis of the decision's motives and inflation indicators
The central bank based its decision on a careful reading of inflation rates, which showed a marked slowdown in urban areas, registering 12.3% in November 2025 compared to 12.5% in October. Despite a slight increase in core inflation to 12.5%, the overall trend remains downward, supported by a stable exchange market and strong foreign currency inflows, giving policymakers room to move towards reducing the cost of borrowing.
Expected economic impacts: locally and in terms of investment
This decision is expected to have a broad positive impact on the Egyptian economy, as evidenced by the following points:
- Supporting the general budget: Lowering interest rates will reduce the cost of servicing domestic public debt, thus easing pressure on the state's general budget and creating financial space for spending on services and development projects.
- Stimulating the private sector: Lower borrowing costs will encourage companies and factories to expand production lines and inject new investments, which is in line with GDP growth that recorded 5.2% in the third quarter of 2025.
- The recovery of the money market: Usually, the decline in returns on bank savings instruments (deposits and certificates) leads investors to look for alternatives with a higher return, which is likely to direct part of the liquidity towards the Egyptian Stock Exchange, direct investment and real estate.
In conclusion, this decision sends a reassuring message to local and foreign investors about the stability of the financial situation in Egypt and the economy’s ability to recover and achieve sustainable growth by the end of 2025.
