Egypt's central bank holds interest rates as economy heats up

CAIRO, Nov 20 (Reuters) - The Central Bank of Egypt kept its overnight interest rates on hold on Thursday, saying it hoped to contain an acceleration in inflation as the economy heated up towards full capacity.

The monetary policy committee kept the deposit rate at 21% and the lending rate at 22%.

A Reuters poll published on Monday showed analysts evenly divided between a hold and a 100-basis-point cut, though the median forecast pointed to a 50-point reduction.

The CBE has been lowering rates this year, with cuts of 225 basis points in April, 100 points in May and 200 points in August. Still, Egypt's real interest rates remain among the highest in the world.

The central bank estimated that real GDP growth edged up to 5.2% in the third quarter of 2025 from 5.0% in the second quarter, driven by growing non-petroleum manufacturing, trade and tourism.

"Output continues to move closer to full capacity utilization, which is expected to be realized by the end of FY 2025/26," the central bank's Monetary Policy Committee said in a statement. The fiscal year ends on June 30.

Headline inflation quickened to 12.5% in October from 11.7% in September, while core inflation rose to 12.1% from 11.3%, according to the state statistics agency CAPMAS.

"Annual headline inflation is projected to inch up as the impact of energy price increases materializes toward the end of Q4 2025. Thereafter, annual headline inflation is projected to gradually decline in H2 2026, converging toward the CBE target," the committee said.

The central bank is targeting inflation of between 5% and 9%.

The acceleration in inflation was driven in part by a hike in state-administered fuel prices and by a new law allowing landlords to increase rents more quickly.

"The Committee has favored a wait-and-see approach, deciding to keep the CBE key policy rates unchanged with a view to containing inflationary pressures, anchoring expectations, and restoring the disinflation path", the statement added. (Reporting by Enas Alashray and Yomna Ehab, writing by Tala Ramadan and Patrick Werr; Editing by David Goodman, Toby Chopra and Nia Williams)