Egypt's central bank keeps main interest rates steady

CAIRO: The Central Bank of Egypt (CBE) kept its main interest rates stable on Thursday despite retreating inflation and an economy suffering from the coronavirus pandemic, saying it remained concerned about global uncertainty.

Of 11 analysts polled by Reuters ahead of the decision, nine had forecast the central bank would keep rates unchanged, while two predicted a 50 basis points cut.

The bank's Monetary Policy Committee (MPC) has left overnight rates unchanged since it pre-emptively lowered rates in March to support the economy during the pandemic.

"With the ongoing high level of global uncertainty, and given the pre-emptive measures taken by the Central Bank of Egypt, including the reduction of 300 basis points during the unscheduled MPC meeting on March 16, 2020, the MPC decided to keep key policy rates unchanged," it said in a statement.

It left the lending rate at 10.25% and the deposit rate at 9.25%, their lowest since early 2016, before Egypt embarked on a three-year, IMF-backed economic reform programme.

Annual urban consumer price inflation slowed in July to 4.2% from 5.6% in June and 4.7% in May, hitting its lowest level since November, the state statistics agency CAPMAS said on Monday. This keeps it well below the central bank's target range of 6% to 12%.

The MPC expected inflation in the fourth quarter of 2020 to remain below the target's mid-point of 9.0%.

Some analysts had expected the central bank to lower interest rates to boost the economy. The crucial tourism industry came to a virtual halt beginning in March.

Preliminary data showed that real GDP growth had fallen to 3.8% in the fiscal year that ended on June 30 despite having grown by 5.6% from July to December, the MPC statement said.

Still, "a number of leading indicators started showing signs of recovery in June and July 2020, in tandem with the easing of the containment measures," the MPC said.