Egypt Likely to Hold Rates While Inflation Stays Stable, Economists Say

The Egyptian central bank will probably hold its benchmark interest rate for the seventh straight meeting after core inflation was almost unchanged.

The bank will keep its overnight deposit rate at 8.25 percent, the lowest level since November 2006, according to all six economists surveyed by Bloomberg ahead of the July 29 gathering of the Monetary Policy Committee.

“Under the current circumstances of little upward build-up in prices and relatively healthy growth there is no reason to expect a change in interest rates at this stage,” John Sfakianakis, the Riyadh-based chief regional economist at Credit Agricole CIB, said by e-mail.

Core inflation, which excludes the costs of fruits and vegetables as well as regulated prices, was 6.70 percent in June compared with 6.69 percent in the previous month. Headline inflation in urban areas of Egypt, the rate that the central bank uses to calculate the core measure, accelerated to 10.7 percent from 10.5 percent in the same period.

Egypt’s economy, driven by tourism, manufacturing and construction, expanded at a 5.8 percent annual rate in the first quarter of 2010, Economic Development Minister Osman Mohamed Osman said in May. The government expects the economy to grow about 5.3 percent in the fiscal year that ended in June, compared with 4.7 percent the previous year.

The central bank last lowered the benchmark rate in September.

The benchmark EGX30 stock index has shed 0.25 percent this year. Talaat Moustafa Group Holding, Egypt’s biggest publicly traded real estate developer which also has tourism assets, has gained 6 percent.

To contact the reporter on this story: Alaa Shahine in Beirut via Cairo newsroom at asalha@bloomberg.net.

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