Egypt’s Monetary Policy Pivot: Balancing Growth Resilience and Inflation Risk

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Aerial view of Cairo cityscape with the Nile River running through the center
Cairo and the Nile River. The Central Bank of Egypt raised its 2026 inflation forecast to 16-17 percent and kept policy rates at 20 percent.

The Central Bank of Egypt’s Q1 2026 Monetary Policy Report marks a clear shift in the macro outlook. Inflation risks have moved higher, while growth forecasts have been revised lower as regional conflict feeds into energy prices, transport costs, imported inflation, and investor risk appetite.

Key insights:

  • The CBE raised its 2026 average inflation forecast to 16.0% to 17.0%, compared with 11% in the previous report.
  • Inflation averaged 13.5% in Q1 2026, up from 12.3% in Q4 2025.
  • Core inflation rose to 12.6% from 12.1%.
  • April urban inflation eased to 14.9% from 15.2% in March, with monthly inflation at 1.1%.
  • Policy rates were kept unchanged at 19.0% for deposits, 20.0% for lending, and 19.5% for the main operation rate.
  • Real GDP growth forecasts were cut to 4.9% for FY2025-2026 and 4.8% for FY2026-2027.
  • The CBE’s Q1 2026 nowcast points to 4.9% growth, while Q4 2025 growth stood at 5.3%.

The key takeaway is that Egypt’s economy remains resilient, supported by services, non-oil manufacturing, tourism, trade, communications, and agriculture. But the inflation outlook has become more exposed to external shocks, especially oil prices, imported inputs, shipping routes, and capital flow volatility.

This keeps monetary policy restrictive for longer and makes exchange rate flexibility, reserves strength, and investor confidence critical to the 2026 outlook.

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