Egypt Central Bank Keeps Rates Unchanged Before Subsidy Cuts

CAIRO (Capital Markets in Africa) – Egypt’s central bank left interest rates unchanged for a second meeting on Thursday as it faces a potential resurgence in inflationary pressures from a fresh wave of subsidy cuts.

The Monetary Policy Committee kept the overnight deposit rate at 15.75% and the lending rate at 16.75% — a decision predicted by all but one of 11 economists surveyed by Bloomberg. Cairo-based investment bank EFG Hermes has said the pause may extend beyond the summer.

A slowing global economy, trade tensions and volatile oil prices caused by geopolitical hazards all “pose risks to the domestic inflation outlook,” the central bank said in a statement.

The Arab world’s most populous country has cut rates just once in the past year as it moved to tame inflation stemming from a 2016 devaluation of the pound and a sweeping International Monetary Fund-backed overhaul of the economy. Annual inflation rocketed to more than 34% before easing back last year.

Inflation decelerated for a second straight month in April, reaching an annual 13%, down from 14.2% in March, as the government boosted food supplies to avoid the price spikes that typically accompany the holy month of Ramadan. Price pressures, though, are likely to resurface with cuts to fuel subsidies due in June.

The central bank, which has yet to set an inflation target for the current year, is aiming to bring price growth down to 9%, plus or minus 3 percentage points, in the fourth quarter of 2020.