Egypt's central bank seen leaving interest rates on hold

All 15 analysts polled by Reuters believe the Central Bank of Egypt would keep rates unchanged at its regular monetary policy committee meeting

  
People walk in front of the Central Bank of Egypt's headquarters at downtown Cairo, Egypt, November 3, 2016.

People walk in front of the Central Bank of Egypt's headquarters at downtown Cairo, Egypt, November 3, 2016.

REUTERS/Mohamed Abd El Ghany

Egypt's central bank is expected to leave its overnight interest rates on hold at a meeting on Thursday, a Reuters poll shows, as mounting global and local inflationary pressures caution against a reduction.

All 15 analysts polled by Reuters believe the Central Bank of Egypt (CBE) would keep rates unchanged at its regular monetary policy committee meeting.

The lending rate has been at 9.25% and the deposit rate at 8.25% since November, their lowest since July 2014.

Urban consumer inflation in Egypt climbed to 4.9% in June, up from 4.8% in May, a slower rise than expected by analysts. The figure remained below the 5% to 9% target range set by the central bank in December.

"Even with inflation remaining below the lower bound of the CBE's target range in June, price pressures are building in Egypt and the headline inflation rate will drift up over the coming months," said James Swanston of Capital Economics.

The bank cut its key rates by 50 basis points (bps) in both November and September after having slashed them by 300 bps in March 2020 to tackle fallout from the coronavirus pandemic.

"The two major currency markets that the central bank is observing, which are the euro and the dollar, have for the most part been stable over the past period," said Wael Ziada of Zilla Holding.

"Liquidity in the local market appears to be sufficient and doesn't need any further measures to increase it," he added.

In a separate Reuters poll last week, economists forecast inflation at 6.0% in the fiscal year that ends in June, down slightly from an expectation of 6.4% in a similar poll three months prior. 

The headline price index is seen at 6.8% in the 2022/2023 fiscal year, revised up from an April projection of 6.2%.

(Reporting by Malaika Tapper; Editing by Susan Fenton) ((Malaika.Tapper@thomsonreuters.com;))


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