The Central Bank of Egypt decided on 29 October 2026 to raise its key rates by one point. It responds to inflationary risks related to regional tensions, commodities and global financial tightening. The flexible exchange rate affects capital movements in the Egyptian pound, with effects on the cost of imports.
According to its October 29 communiqué, the Monetary Policy Committee increases the overnight deposit rate to 20% and the loan rate to 21%. The main transaction rate and discount rate rise to 20.5 per cent. The central bank presents this 100-basis-point increase as a preventive measure to anchor inflation expectations.
The Egyptian pound in the face of external increase
The decision comes in a context of foreign exchange tensions. In central bank rates dated 29 October 2026, the dollar stood at £55.9866 for purchase and £56.1234 for sale. This dated observation does not constitute a course of 3 November.
In its press release of 29 October, the EPC targets inflation of 7%, with a margin of two points, on average in the fourth quarter of 2027. This objective depends in particular on the evolution of the regional conflict and international prices.
The monetary mechanism distinguishes these two subjects. The rate corridor covers the daily cost of money between banks. It forwards the monetary policy orientation to the market. The currency exchange responds to the supply and demand for currencies.
Lower annual inflation, but a more tense month
The Central Bank communiqué of 11 October 2026 shows lower inflation over a year, but an acceleration of the monthly price increase. In September, general urban inflation reached 13.9% year-on-year, compared with 14.5% in August. Underlying inflation also slowed from 14.9% to 14.1%.
Over a month, urban prices rose by 1.3% in September, after 0.1% in August. Monthly underlying inflation rose from 0.3% to 0.8%. The annual and monthly comparisons therefore describe different movements.
| Indicator | August 2026 | September 2026 |
|---|---|---|
| Annual urban inflation | 14.5% | 13.9% |
| Monthly urban inflation | 0.1 % | 1.3 % |
| Annual underlying inflation | 14.9% | 14.1% |
| Monthly underlying inflation | 0.3 % | 0.8 % |
The exchange absorbs a shock without preventing exits
In a communiqué of 9 February 2026 on the AlUla conference, the central bank reported the explanations of its governor Hassan Abdalla. He presented exchange rate flexibility, adopted since March 2024, as a supply- and demand-based framework. The Governor emphasized market adjustment rather than a predefined level of currency.
An episode documented by the International Monetary Fund illustrates this operation. In its supplement dated 27 July 2026, the IMF described a book that had passed from about 48.81 for a dollar in early July to 50.7. It associated this with the return of regional tensions and the rise in oil.
The Fund then reported modest outflows of capital, absorbed by exchange adjustment. The price of the currency thus absorbed part of the shock. The Fund also noted the additional inflationary pressures associated with regional tensions.
The IMF estimated government domestic securities held by non-residents at $37.2 billion at the end of June. This stock was close to the peak of 39.1 billion observed on February 18. These amounts describe investments in public securities held on those dates.
Important reservations, but separate measures
On October 7, 2026, the central bank announced $57.35 billion in net international reserves at the end of September, according to a provisional result.
His October 12, 2026 press release on the balance of payments provides further insight. The current account deficit for the period from July 2025 to June 2026 was $22.5 billion. The capital and financial account recorded 23.2 billion net inflows.
Financial account flows consist of several forms of financing over the financial year, beyond portfolio investments alone.
Long funding remains a separate objective
In a statement issued by the Ministry of Finance on 1 November 2026 on the Cairo Forum, Ahmed Kouchouk defends a diversification of financing. It wants to attract more investors to long bonds and develop local currency financing with international institutions. The Minister presents financing in local currencies as a means of reducing foreign exchange risks.
The details of these financings remain to be specified. The next inflation and balance of payments data will inform the evolution of prices and financial flows following the rise in rates.
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