CAIRO: Egypt’s central bank said it kept its benchmark interest rates on hold after a monetary policy meeting on Thursday, as headline inflation eases and political uncertainty delays an economic recovery.
Six economists surveyed by Reuters had all forecast that the central bank would leave the overnight lending and deposit rates at 9.75 percent and 8.25 percent, respectively. There has been no change in the two rates since Sept. 17, 2009.
Egypt’s economy badly needs more investment to recover from the turmoil that followed the ousting of president Hosni Mubarak in February, but economists say lower benchmark rates may do little to help.
Local banks are already lending heavily to the government as it seeks funds to cover a ballooning budget since the uprising, and treasury yields have risen steadily.
The core inflation measure used by monetary policymakers, which strips out volatile items like fruit and vegetables, rose to 7.95 percent in the year to September from 6.98 in August.
But headline inflation eased as slowing food price growth offset a faster increase in housing costs, government figures showed this week.
Egypt faces rising unemployment, a widening fiscal deficit and pressure on its currency just as the global economy falters. But economists say it may be unable to tackle its challenges head-on until a new elected government is in place.
Egypt’s Finance Minister Hazem El-Beblawi quit the job on Tuesday only to return a day later when the ruling military council rejected his resignation, underscoring the country’s fragile policy environment.
Beltone Financial said this week it expected inflationary pressures to subside in the short term on weak global and domestic growth, although structural rigidities would continue to affect prices.
"We believe Egypt’s monetary policy will continue to be targeted toward fending off interest rate hikes, stabilizing the currency, all while ensuring inflationary pressures remain under control," it said.
