CBE highlights strong monetary easing transmission across money, debt markets

The Central Bank of Egypt (CBE) has underscored the effective transmission of its 2025 monetary easing cycle, with the majority of policy rate cuts swiftly reflected in money market conditions, bank pricing, and government debt yields.

During the fourth quarter (Q4) of 2025, the CBE reduced its policy rate by a further 200 basis points (bps), bringing cumulative rate cuts since the beginning of the year to 725 bps. As a result, the policy rate declined to 20.5% in Q4 2025, compared to 27.8% in Q1 2025. Despite the substantial easing, nominal interest rates remained above inflation, preserving positive real returns.

Approximately 94% of the cumulative policy rate cuts were transmitted to the interbank market. The overnight interbank rate stood at 20.6% in Q4 2025, down from 27.4% in Q1 2025, reflecting a rapid and effective passthrough of monetary policy to short-term money market conditions.

At the same time, Egypt’s average excess liquidity declined sharply, reaching EGP 176.5bn in Q4 2025 – equivalent to 20% of the reserve requirement – compared to EGP 828.5bn (90% of the reserve requirement) in Q1 2025, before the easing cycle began. This marks the lowest level since Q4 2016, largely driven by net government securities issuance.

The contraction in excess liquidity was accompanied by a revival in overnight central bank lending, which averaged EGP 14.97bn in Q4 2025 following a prolonged period of near-zero activity.