The Monetary Policy Committee (MPC) of the Central Bank of Egypt decided in its Thursday meeting to keep the overnight deposit rate and overnight lending rate unchanged for the 14th time.

 

They remain at 8.25 and 9.75 per cent respectively, while the discount rate is also unaltered at 8.5 per cent.

 

"We expected it to be raised because of the increase in inflation rates announced earlier today - we are reaching a point where the interest rate is negative because it is less than inflation," Youmna Hamaky, dean of economics at Cairo's Ein Shams University, told Ahram Online.

 

"The Egyptian central bank suffers from two pressures forcing it to maintain the interest rate unchanged," adds Hamaky, who says that domestic governmental debt, which already exceeds LE100 billion, will rise again and be considered an additional burden on the government if the interest rate is raised.

 

"They also want to stimulate investments and investors," says Hamaky.

 

Seven economists in a Reuters survey predicted the central bank's Monetary Policy Committee would leave its overnight lending and deposit rates unchanged.

 

The CBE has maintained its lending rate at 9.75 per cent and its deposit rate at 8.25 per cent since 17 September 2009.

 

Egyptian food prices have rocketed more than 12 per cent over the last year, with analysts pointing to a 'perfect storm' of problems, including stalled domestic production, poor market regulations and spiraling import bills, fed by a faltering Egyptian pound and soaring global energy costs.

 

Urban consumer price inflation, the most closely watched indicator of prices rose to 114.6 points in May, making for a 12.2 per cent increase year-on-year, up from 10.8 per cent in January, Egypt's Central Agency for Public Mobilization and Statistics (CAPMAS) announced on Thursday.