Egypt’s central bank kept its benchmark interest rate at the lowest level since November 2006 for the third consecutive meeting, saying it supports economic growth while keeping inflation in check.
The overnight deposit rate was left at 8.25 percent and the overnight lending rate at 9.75 percent, the Cairo-based central bank said in a statement on its Web site today. Nine of 10 economists surveyed by Bloomberg had predicted the decision, while one forecast a quarter-point increase.
“The decision is the right one,” Simon Williams, the Dubai-based chief Middle East economist at HSBC, said by e-mail. “I still expect the next move to be upward. We’ll have a clear idea of how soon when we see next week’s inflation print.”
The central bank reduced rates six times in 2009 to help the economy of the most populous Arab country face the global financial crisis. In its statement, the central bank noted that the economy grew 4.9 percent in the third quarter of 2009 “reflecting a steady improvement in economic activity.”
he statement didn’t refer to Jan. 6 remarks by Economic Development Minister Osman Mohamed Osman that initial data suggested a slowdown in growth to 4.5 percent in the fourth quarter of last year. Central bank officials couldn’t be immediately reached for comment.
Growth remains below the average 7 percent in the three fiscal years through June 2008 after the global financial crisis hurt revenue from tourism, the Suez Canal and foreign direct investment.
Urban inflation, the benchmark rate that the central bank monitors, was unchanged in December at 13.2 percent, the highest since February 2009. Core inflation, which excludes the cost of fruits and vegetables as well as regulated prices, accelerated to 6.85 percent in the same month from 6.59 percent in November.
The central bank said inflationary pressures remain “subdued,” with core inflation with its “comfort zone,” making the current level of interest rates “appropriate and supportive” of economic growth.
The bank also reiterated that it would not hesitate to adjust its key rates to ensure price stability.
“Although their new measure of core inflation shows limited upward pressures, there are still signs that activity is picking up and that inflationary pressures are biased to the upside,” Shahin Vallee, a London-based emerging markets strategist at BNP Paribas SA, said by e-mail before the decision. He was forecasting a 25 basis point increase.