Egypt Central Bank Keeps Interest Rates on Hold as Inflation Stays Stable

The Egyptian central bank held its benchmark interest rate at a four-year low for the seventh straight meeting after core inflation was almost unchanged.

The Cairo-based bank kept its overnight deposit rate at 8.25 percent, the lowest level since November 2006, according to a statement on its website. All six economists surveyed by Bloomberg ahead of the meeting of the Monetary Policy Committee had predicted the decision.

“Headline and core inflation continued to decelerate in the second quarter of 2010 on the back of lower year-on-year food prices,” Mohamed Abu Basha, economist at Cairo-based investment bank EFG-Hermes Holding SAE, said in a report today. “However, as growth continues to accelerate risks are increasing. We therefore expect interest rates to remain unchanged until the end of 2010.”

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 expanded at a 5.9 percent annual rate in the second quarter of 2010, the government said yesterday. For the fiscal year that ended in June, the economy grew 5.3 percent compared with 4.7 percent the previous year.

The central bank, which meets every six weeks to discuss monetary policy, last lowered the benchmark rate in September.

The benchmark EGX30 stock index has gained about 1.7 percent this year. Talaat Moustafa Group Holding, Egypt’s biggest publicly traded real estate developer which also has tourism assets, has gained about 6.2 percent.

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

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