Egypt’s central bank kept its key interest rates unchanged on Thursday, holding fire on further action until the impact on inflation of last month’s steep hike in borrowing costs becomes clearer.
The Monetary Policy Committee kept the overnight deposit rate at 14.75 percent and the overnight lending rate at 15.75 percent, the bank said in a statement, as predicted by seven out 11 economists polled by Reuters this week.
The bank had already raised rates by a cumulative 550 basis points this year.
In early November, the central bank ditched its foreign exchange peg of 8.8 pounds per dollar and, to help stabilise the newly floated currency, raised interest rates by 300 basis points. The pound has since weakened to around 19 per dollar EGP1=.
Annual headline inflation surged to an eight-year high of 19.4 percent in November, and many economists expect prices to keep rising next year, driven by economic reforms, including subsidy cuts and tax increases.
“Consumer prices during November were strongly impacted by the economic reform measures related to the foreign exchange rate market liberalisation as well as the hydrocarbon subsidies adjustment,” the MPC said in a statement.
“Looking ahead, annual inflation is expected to narrow after being impacted by transitory cost-push factors stemming from the economic reform measures … At this juncture and given the balance of risks, the MPC judges that the key CBE rates are currently appropriate.”
Egypt had been struggling with a foreign currency shortage since an uprising in 2011 drove away tourists and foreign investors, both major sources of hard currency.
In November, it sealed a $12 billion, three-year loan from the International Monetary Fund to support its economic reform programme.