CAIRO: Egypt’s central bank left its key overnight interest rates on hold on Thursday, saying non-food inflation was largely subdued and global economic growth was uncertain.
The decision by the bank’s Monetary Policy Committee to leave rates unchanged was expected by all 14 economists who took part in a Reuters poll this week.
The committee met hours after a new asset-buying plan by the US Federal Reserve caused the Egyptian pound to post one of its biggest increases against the dollar in nearly six years.
Before the committee’s meeting, some analysts had said the US policy of quantitative easing would increase the already wide differential between Egyptian and US interest rates, making the bank even less likely than before to increase rates.
They said that with even Egyptian inflation seemingly under control and growth below the government’s target of about 6 percent, the central bank had little incentive to raise rates.
"It would have remained unchanged either way because of the relatively stable inflation and the weakening of global growth," said Mohamed Abu Basha of EFG-Hermes.
The Fed on Wednesday said it would spend $600 billion to buy longer-term US Treasury bonds through to the end of next June as part of a renewed quantitative easing program. The move boosted the normally steady Egyptian pound by about 1 percent as investors globally headed into riskier assets.
Repeating a statement it made after its last meeting on September 16, the Egyptian central bank said: "Looking ahead, unfolding global economic developments have created uncertainty about the nascent global recovery, which could potentially weigh on domestic investment and external demand."
It added that underlying inflation pressures from the economic recovery appeared to be contained.
The central bank kept its overnight lending rate steady at 9.75 percent and the deposit rate at 8.25 percent, its ninth pause since it stopped lowering rates in September 2009. It also left the discount rate unchanged at 8.5 percent.
Although urban inflation has fallen from a peak of 23.6 percent in August 2008, it reignited late last year, climbing to as high as 13.6 percent in January even as core inflation remained relatively steady.
Urban consumer price inflation rose to 11 percent year-on-year in September, its second month of increases. Core inflation, which strips out subsidized goods and volatile items including fruit and vegetables, fell in September to 7.6 percent from 8.2 percent in August.
Egypt last month revised down its gross domestic product growth figure for the April-June quarter to 5.4 percent from a previously stated 5.9 percent.
