Egypt Central Bank keeps key interest rates unchanged at MPC meeting

CAIRO (Capital Markets in Africa) – Egypt’s central bank kept its key interest rates unchanged on Thursday in a meeting of its Monetary Policy Committee, it said in a statement, two weeks after it surprised markets with a 3 percent hike in its key rates.

The bank kept its overnight deposit rate at 14.75 percent and its overnight lending rate at 15.75 percent, it said in a statement, meeting expectations of all 15 respondents in a Reuters poll.

The bank had already raised rates by a cumulative 550 basis points this year.

Egypt had been struggling to revive its economy since a popular uprising in 2011 drove away tourists and foreign investors – both major sources of hard currency.

On Nov. 3, the bank ditched its peg of 8.8 per dollar and hiked rates by 300 basis points to stabilise the newly floated pound. Its initial guide level was 13 to the dollar and on Thursday it allowed the pound to drift to about 15.75/16.00 to the dollar

Last week Egypt secured a $12 billion loan from the International Monetary Fund but must push through with painful economic reforms which include imposing a Value Added Tax, cutting electricity subsidies and raising fuel prices.

The reforms contributed to a rise in Egypt’s core inflation, which jumped in October although annual urban consumer price inflation eased for the second consecutive month after hitting an eight-year high in August.

Yields on Egyptian treasuries jumped significantly in auctions following the surprise hike on Nov.3 but later dropped as demand for government treasuries rose.

On Thursday, the average yields on six-month and one-year treasury bills dropped significantly at an auction.

The 182-day treasury bill yield dropped to 17.716 percent from 18.469 percent at the previous auction, and the yield for the 357-day treasury bills dropped to 17.606 percent from 18.903 percent in a similar auction.