The Central Bank of Egypt's headquarters in downtown Cairo (Photo: Reuters)
Egypt’s central bank has kept key interest rates unchanged, as part of its efforts to eliminate currency black market and control inflation, analyst says.
The overnight deposit and lending rates were held at 8.75 percent and 9.75 percent respectively, the Monetary Policy Committee announced on Thursday. The discount rate was also kept at 9.25 percent.
“Interest rates on the pound needed to remain attractive, as part of the central bank's efforts to eliminate the black market,” Mohamed Abu Basha, an economist at the Cairo-based investment bank EFG- Hermes told Ahram Online.
The central bank has recently taken measures to eliminate a currency black market that has flourished as Egypt’s economy was drained by four years of political turmoil following a popular uprising.
Key interest rates were surprisingly cut by 50 basis points last month on lower inflation expectations driven by cheap oil.
The CBE also devalued the pound to 7.53 per dollar from 7.14 per dollar, while widening the band around which banks are allowed to trade the dollar to 10 piasters from 3 piasters.
However, as the country anticipates another round of subsidy cuts and the introduction of value added tax (VAT), inflation remains a concern that does not allow for further interest rate cuts, Abu Basha said.
Since his election as Egypt’s president in June last year, Abdel Fattah El-Sisi has led his government in a series of fiscal reforms, including cutting fuel subsidies and introducing new taxes.
The annual inflation rate eased to 9.7 percent in January, compared to 10.13 percent in the previous month.
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