Egypt's central bank raises key interest rates by 100 basis points

Overview

Updated 1 hour ago

Egypt's central bank raised its benchmark rates by a full percentage point Thursday, lifting the overnight deposit rate to 20% and the lending rate to 21%. It was the first hike since March 2024, and it caught markets off guard: all 13 analysts polled by Reuters had expected no change.

The bank cited an adverse external environment and rising uncertainty. The pound hit a record low above 56 per dollar this week, inflation runs near 14% against a 7% target, and the Middle East war has drained Suez Canal revenue by an estimated $11 billion.

The move reverses part of the easing cycle that trimmed 825 basis points between April 2025 and February 2026. It raises the cost of government borrowing and business credit at a time when interest payments already absorb about 10% of economic output.

Why it matters

Egypt's rate hike signals the pound's slide and regional war are rekindling inflation, raising borrowing costs and food prices nationwide.

Questions about this story

Free account needed to ask — your question is kept and asked for you right after sign-up. Answers are public.

No questions yet — be the first to ask.

Key Indicators

1 percentage point

Size of rate increase

Overnight deposit rate rises from 19% to 20%, lending rate from 20% to 21%.

56+

Egyptian pounds per US dollar

Record low for the pound, crossed for the first time on October 26, 2026.

13.9%

Annual urban inflation, September

Up from a 12.9% low earlier in the year, against a 7% central bank target plus or minus two points.

825

Basis points cut, April 2025–February 2026

The easing cycle that ended when the US-Iranian war drove up energy prices.

$11B

Lost Suez Canal revenue

Estimated by Egypt's foreign minister as shipping diverted away from the canal because of the war.

Voices

Curated perspectives — historical figures and your fellow readers.

People Involved

Hassan Abdalla

Governor, Central Bank of Egypt

Led the rate-setting committee that approved the hike

Ahmed Shawky

Advisory member, Egypt Center for Economic and Strategic Studies

Called the hike a surprise against market expectations

James Swanston

Middle East and North Africa analyst, Barclays

Pre-decision view backed holding rates

Organizations Involved

Central Bank of Egypt

Monetary authority

Raised benchmark rates by 100 basis points on October 29, 2026

Egypt's monetary authority, whose policy committee sets the benchmark deposit, lending, and main operating rates.

Egyptian Exchange

Stock exchange

Halted trading October 25 amid a sharp selloff

Cairo's stock exchange, a gauge of investor confidence in Egypt's economy.

Timeline

March 2024 November 2026

9 events Latest: Today

Tap a bar to jump to that date

November 2026
Euro treasury bill auction
Upcoming Markets

CBE sells 600 million euros in one-year bills to raise hard currency.
In 4 days
October 2026
CBE hikes 100 basis points
Today Policy

Deposit rate to 20%, lending rate to 21%, first increase since March 2024.
Today
US Fed holds rates
Policy

Federal Reserve keeps target range at 3.75%–4% amid inflation and war uncertainty.
Yesterday
Pound hits record low
Markets

Currency crosses 56 per dollar for the first time in its history.
3 days ago
Exchange halts trading
Markets

Egyptian Exchange pauses 30 minutes as investors sell on war worries.
4 days ago
September 2026
Sixth straight hold
Policy

MPC keeps deposit rate at 19% and lending rate at 20%.
September 24th, 2026
February 2026
Easing cycle ends
Policy

Cuts stop as US-Iranian war drives up energy prices and inflation risks.
February 2026
April 2025
CBE begins cutting rates
Policy

Starts easing cycle that trims 825 basis points by February 2026.
April 2025
March 2024
Previous rate hike
Policy

Last increase before October 2026; deposit rate rose heading into the easing cycle.
March 2024

Scenarios

CBE Holds Rates Steady Through Mid-2027

Possible Resolves by Q2 2027

Discussed by: Economists quoted in Egyptian media who argue the hike is a one-off to anchor expectations

The hike works: foreign investors return to Egyptian debt on the higher yield, the pound stabilizes, and inflation resumes its downward path. The committee keeps rates at 20%/21% through the first half of 2027. This is the outcome the central bank's own statement points to, framing the move as defending the disinflation path rather than starting a tightening cycle.

Further Hikes Follow as Pound Slides Below 60

Possible Resolves by Q1 2027

Discussed by: Analysts at Barclays and others who warned regional escalation and currency weakness argue against holding

The pound keeps sliding past 56 per dollar as foreign investors stay on the sidelines, import costs push prices up, and inflation reaccelerates above 15%. The committee is forced to tighten again before mid-2027. Pressure on the external account is severe: Suez revenue is down roughly $11 billion and the government needs hard currency for imports and debt service.

Hike Attracts Capital, Cuts Resume by End of 2027

Unlikely Resolves by End of 2027

Discussed by: Advisers like Ahmed Shawky who said the move preserves the pound's appeal to foreign investors

The higher yield pulls foreign money back into local treasury bills, the currency firms, and inflation falls toward the 7% target. With the external position stabilized and the war contained, the committee resumes cutting rates in the second half of 2027. This path assumes the regional conflict de-escalates and Suez traffic recovers, easing the hard-currency squeeze.

Historical Context

3 moments from history that rhyme with this story — and how they unfolded.

November 2016

Egypt's November 2016 currency float

Under a new IMF program, Egypt floated the pound and hiked its benchmark rate by 300 basis points in a single day to stop capital flight and attract foreign money. The currency lost half its value within weeks.

Then

Foreign investors returned to Egyptian debt as yields surged, and the IMF disbursed a $12 billion loan.

Now

The episode locked in a pattern: sharp currency moves paired with aggressive rate action whenever Egypt faces external financing stress.

Why this matters now

Thursday's hike repeats the playbook in miniature, defending the pound and foreign-investor appetite for Egyptian debt as the currency breaks records.

2022–2023

Egypt's 2022–2023 inflation surge

The global food and energy shock after Russia's invasion of Ukraine, plus repeated devaluations, pushed Egyptian urban inflation above 30% in 2023. The central bank hiked rates repeatedly to contain it.

Then

Inflation peaked near 40% and borrowing costs rose sharply, squeezing households and businesses.

Now

A painful tightening cycle followed by an easing phase set the stage for the 825 basis points of cuts in 2025–2026 that Thursday's hike partly reverses.

Why this matters now

The current decision is driven by the same forces: devaluation feeding import costs, energy price shocks from war, and a central bank choosing to fight inflation with higher rates.

Late 2023 – 2024

Red Sea shipping crisis (2023–2024)

Houthi attacks on cargo ships in the Red Sea forced carriers to reroute around Africa, cutting Suez Canal transits roughly in half and slashing Egypt's hard-currency revenue from tolls.

Then

Egypt lost billions in canal income, worsening its dollar shortage and pressuring the pound.

Now

The crisis showed how dependent Egypt's external accounts are on regional stability, a lesson now recurring in the current war.

Why this matters now

The 2026 Middle East war has again diverted shipping from Suez, costing Egypt an estimated $11 billion and tightening the squeeze behind this rate hike.