Eight out of nine economists in a Reuters poll this week forecast the central bank's Monetary Policy Committee would leave its overnight lending and deposit rates unchanged to balance combating inflation and supporting economic growth. One economist sees a 50 basis point cut.

The bank has maintained its lending rate at 9.75 per cent and its deposit rate at 8.25 per cent since Sept. 17, 2009.

Egypt's economy nearly ground to a halt during weeks of protests that toppled the government of former President Hosni Mubarak in February, and some of its main sources of foreign exchange, including tourism and foreign investment, have collapsed.

Annual urban consumer inflation accelerated in March to an 11-month high of 11.5 per cent, driven by soaring food prices. Core inflation, which strips out subsidised goods and volatile items including fruit and vegetables, eased to 8.54 per cent from 9.51 percent.

"I do not think inflationary pressures have risen enough yet to push them into making a rise," said Citi Economist David Cowan.

Urban inflation has fallen from a peak of 23.6 per cent in August 2008. It reignited last year, climbing to as high as 13.6 per cent in January 2010.

Several economists forecast inflation will continue rising in April on the back of higher oil and food prices but they expect the central bank to keep rates steady on Thursday to support an economy reeling from the impact of the popular revolt.

JP Morgan economist Brahim Razgallah expects rates to stay on hold for the rest of the year. However, he also sees a chance of a rate cut later in the third or fourth quarter "if inflation comes down significantly".

Raising rates to combat food-driven inflation would have limited or no effect on overall prices, analysts say.

One economist polled expects the central bank to cut interest rates on Thursday to support economic growth.

A collapse in tourism and foreign investment following the political turmoil has hit revenues hard and economists forecast the economy of the most populous Arab country contracted 7 percent in January-March from the previous quarter.

The International Monetary Fund projects Egypt's economic growth to plunge to 1.0 per cent this year after a 5.1 percent expansion in 2010. [ID:nLDE73P0DY]

Egypt's finance minister has estimated that the political turmoil would reduce economic growth to 2.5-3 per cent in the financial year to end-June from the government's previous forecast of 6 percent.

The economy grew by 5.1 per cent in the fiscal year that ended June 30, 2010. The government believes it needs at least 6 percent growth to generate enough jobs to absorb new entrants to the labour force.

 An interest rate hike would risk further slowing growth in an economy that has been severely rattled by political unrest.

A decrease in rates would risk spurring an increase in inflation. Rising food prices were a major factor in stoking the protests.

Still, the impact of interest rate policy in Egypt is limited because the banking sector -- and the amount of credit it extends as a percentage of GDP -- is relatively small, analysts say.

Analysts from Bank of America Merrill Lynch, Beltone Financial, Citi, Deutsche Bank, EFG-Hermes, HC Securities, HSBC Middle East, JP Morgan and Pharos Securities.

(CBE's Monetary Policy Committee is due to meet tommorrow April 28 to decide on Egypt's interest rate from 2:30 to 4:30 GMT)