Core Viewpoint - The Central Bank of Egypt has significantly cut interest rates by 200 basis points, marking the third rate cut of the year, driven by declining inflation and improving employment conditions [1][2]. Monetary Policy - The overnight deposit rate has been reduced from 24.00% to 22.00%, and the overnight lending rate from 25.00% to 23.00% [2]. - The Central Bank aims to anchor inflation expectations and maintain a downward trajectory of inflation through this rate cut [2]. - The unemployment rate decreased from 6.3% in Q1 2025 to 6.1% in Q2 2025, indicating a positive trend in the job market [2]. - The Central Bank forecasts an average inflation rate of 14% to 15% for the entire year of 2025, with a target of 7% by Q4 2026 and 5% by Q4 2028 [2][4]. Economic Performance - Egypt's economy is showing signs of recovery, with a real GDP growth rate of 5.4% in Q2 2025, compared to just 2.4% in the previous fiscal year [3]. - Inflation has decreased from 16.5% in the previous quarter to 15.2% in Q2 2025, with negative monthly growth rates in July 2025 for both overall and core inflation [3]. - The non-oil manufacturing sector grew by 16.03% in Q2, contributing 1.9 percentage points to GDP growth, while the tourism sector saw a 23% increase [5]. - Exports of goods and services surged by 54.4% in Q2, significantly outpacing the 18.7% increase in imports, contributing approximately 2.7 percentage points to real GDP growth [5].