Egypt's interest rate likely to remain unchanged

Ahram Online, Thursday 25 Aug 2011

Experts predict central bank will today decide to keep the rate the same to stimulate growth while keeping inflationary and currency pressures under control

egyptian pound
egyptian pound

Egypt's central bank (CBE) is expected to announce its key overnight deposit and lending rates on Thursday amid expectations they will be kept unchanged.

The bank's Monetary Policy Committee (MPC) has kept the lending rate at 9.75 per cent and the deposit rate at 8.25 per cent since September 2009.
Leading investment bank Beltone Financial predicts the rate will not change in order to stimulate growth whilst keeping inflationary and currency pressures under control in Egypt’s troubled economy. 
It said that since inflation has slowed down significantly in July 2011, tightening the monetary policy could ignite inflationary pressures on the economy.
The annual inflation rate fell well below estimated rates, with year-on-year urban inflation dropping from a hefty 11.8 per cent in June 2011 to 10.4 per cent in July 2011.
“Given that inflation is slowing down and a prospect of Egypt’s speedy economic recovery is unlikely, on the back of the new developments in the global economy, we find no reason for the Central Bank of Egypt to tighten its monetary policy in its upcoming MPC meeting today,” reads a note issued by the investment bank earlier today.
It also added that any interest rates cuts would increase the pressures on the Egyptian pound.
Beltone also expects the Central Bank to continue its seven-day repurchase agreement facility at 9.25 per cent.
They also maintained their outlook of unchanged policy rates for the next two MPC meetings in 2011, taking place on 13 October and 1 December.
“If a double-dip recession is to materialise, leading to subdued inflation in Egypt and less pressure on EGP/USD, the Central Bank could opt to lower interest rates in 2012,” Beltone said.
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