The Central Bank of Egypt has announced a reduction in its key interest rate by 1%, bringing the deposit rate to 19% and the lending rate to 20%. This decision comes in response to a noticeable decrease in inflation rates recently. Specifically, the annual inflation rates dropped to 11.9% and 11.2% in January 2025, from 12.3% and 11.8% in December 2024, respectively, indicating a continuing downward trend in inflation that has been observed since 2025.

Moreover, the Central Bank has also reduced the cash reserve ratio for banks from 18% to 16%. This adjustment is significant as it allows banks to have more liquidity available for lending, potentially stimulating economic activity. The overall average inflation rates for the previous year were recorded at 14.1% and 12.1%, a considerable decrease compared to the high figures of 28.3% and 27.2% in 2024. The decline in inflation is attributed to reductions in food price inflation, which has reached its lowest level in four years, alongside a steady decline in non-food price inflation, albeit at a slower pace.

In its announcement, the Central Bank highlighted that improvements in exchange rates and controlled demand conditions have contributed to the reduced inflation of non-food items. This monetary policy decision is likely aimed at supporting economic growth while managing inflation expectations, reflecting a cautious yet responsive approach to the current economic climate in Egypt.