Egypt’s inflation slowed more than expected in November, easing pressure on the central bank after last month’s setback and reopening the door to further rate cuts as soon as its 25 December meeting.
Data from Egypt’s statistics agency show urban headline inflation eased to about 12.3% year-on-year in November from 12.5% in October, with the monthly rate dropping sharply to 0.3% from 1.8%. The surprise slowdown came even after a cut in fuel subsidies, suggesting that underlying price pressures are cooling again.
Food and beverage inflation, the largest component of the basket, also moderated, with prices rising more slowly than in October and falling on a month-on-month basis. That marks a reversal from October, when Egypt recorded its first inflation acceleration in five months, forcing the Central Bank of Egypt (CBE) to pause its easing cycle despite having just delivered a fourth rate cut this year.
From crisis peak to double-digit, but still high
The latest figures cap a volatile two-year cycle. Inflation peaked near 38% in September 2023 after a series of currency shocks and FX shortages, before falling steadily through much of 2024 as authorities floated the pound and tightened policy.
In March 2024, Egypt let the pound slide by almost 40% as part of a wider IMF-backed reform push. The devaluation, combined with an 800-basis-point rate hike that took the policy rate above 27%, helped secure an expanded Fund programme and unlock more than $5 billion in additional support. But it also pushed up import and fuel costs, feeding the inflation surge that followed.
By early 2025, the combination of FX relief and tighter policy started to bite. FiA reported in March that urban inflation dropped to 12.8% in February, its lowest level in almost three years, helped by increased foreign-exchange availability and a strong base effect. Analysts then began to pencil in substantial rate cuts for the rest of the year.
A stop–go easing cycle
The CBE has since been trying to normalise policy without losing its grip on prices. Between April and October 2025, it cut its overnight deposit rate from 27.25% to 21%, delivering a total of 625 basis points of easing over several meetings as inflation trended lower.
Finance in Africa’s October coverage noted that the move to 21% put the key rate at a two-year low, though still among the highest in Africa, and was framed by the CBE as a way to reduce debt-service costs and support investment while inflation cooled.
The October inflation print briefly interrupted that narrative. Headline inflation ticked up for the first time in five months, prompting the MPC to pause at its November meeting and signal caution over the impact of subsidy reforms and tax changes.
November’s softer reading now strengthens the case for resuming cuts. With inflation less than half its 2023 peak and trending sideways in the low-teens, the real policy rate has turned decisively positive, increasing the burden on borrowers and the government.
Growth, banks and the IMF
The inflation slowdown comes against a backdrop of improving growth data. As FiA reported in late November, Egypt’s GDP has climbed to its strongest pace in three years, driven by non-oil sectors such as manufacturing, tourism and real estate, even as hydrocarbons lag. Policymakers see this as evidence that the reform programme is broadening the base of the recovery.
The combination of high nominal rates and cooling inflation has been a double-edged sword. On one hand, a 21% policy rate keeps local-currency assets attractive to foreign portfolio investors; on the other, it raises domestic funding costs and risks choking off credit to the real economy.
The IMF, which has tied its programme to tighter monetary and fiscal discipline, will be watching closely. Further cuts that are not backed by sustained disinflation could undermine credibility. However, holding rates too high for too long risks stalling the investment that reforms are meant to unlock.
What to watch at the 25 December meeting
The CBE’s next policy meeting on 25 December will test how it balances these trade-offs. The November inflation data give it more room to cut, but several factors argue for caution:
- Subsidy reforms and fuel-price adjustments are still feeding through, with earlier increases of up to 13% in some fuel categories.
- A new rental law that raised housing costs contributed to October’s inflation uptick and could re-emerge if landlords continue to adjust prices.
- External risks, including global rates, geopolitical tensions and Suez-linked shipping disruptions, continue to weigh on FX flows.
If the MPC judges that these risks are contained, another 100-basis-point cut would be consistent with the path it has taken since April, still leaving Egypt with one of the highest real rates in the region. A more cautious move, or another hold, would signal that the committee wants more evidence that the disinflation trend is durable.
For now, November’s numbers mark a rare upside surprise in Egypt’s long inflation battle — and give the central bank the first clean opportunity in months to think about easing again.
