Egypt cen­tral bank to keep in­ter­est rates on hold -sur­vey

Daily Trust - - BUSINESS -

Egypt’s cen­tral bank will keep in­ter­est rates on hold next Thurs­day as it bal­ances the need to fight in­fla­tion while sup­port­ing the cur­rency and stim­u­lat­ing an econ­omy bat­tered by more than three years of up­heaval, a Reuters poll showed.

An­nual ur­ban con­sumer in­fla­tion re­mains high de­spite slow­ing for three con­sec­u­tive months be­fore hold­ing steady at 9.8 per­cent in March, but it may still be too early for the cen­tral bank to cut rates to spur on eco­nomic ac­tiv­ity.

Six econ­o­mists polled by Reuters said they ex­pect the cen­tral bank to keep rates on hold on April 24.

Moustafa Bas­siouny, an econ­o­mist at Signet In­sti­tute, said the cen­tral bank’s Mon­e­tary Pol­icy Com­mit­tee was likely to wait un­til next month be­fore cut­ting rates.

“I ex­pect the MPC to keep rates on hold un­til the fol­low­ing meet­ing be­cause of the con­tin­u­ing in­fla­tion­ary pres­sures and the slug­gish eco­nomic per­for­mance so far this year,” he said. At its last meet­ing, on Feb. 27, it kept its de­posit and lend­ing rates at 8.25 and 9.25 per­cent, re­spec­tively.

Wil­liam Jack­son, emerg­ing mar­kets econ­o­mist at Cap­i­tal Eco­nom­ics, said one prob­lem was that in­fla­tion could rise more this year.

“The re­cent rise in global food prices could cause Egyp­tian food in­fla­tion to pick up later this year,” he said.

Egypt’s econ­omy and the pound have suf­fered since au­to­cratic leader Hosni Mubarak was ousted in a pop­u­lar up­ris­ing in 2011, de­ter­ring the tourists and for­eign in­vestors who were a ma­jor source of hard cur­rency for the coun­try.

The tum­ble in the Egyp­tian pound has also pres­sured the cen­tral bank to keep in­ter­est rates high to lure funds out of for­eign cur­ren­cies. The bank has been burn­ing up its for­eign cur­rency hold­ings to sup­port the lo­cal cur­rency.

Eco­nomic growth in the Arab world’s most pop­u­lous na­tion, mean­while, has been slug­gish de­spite it re­ceiv­ing more than $12 bil­lion in aid from Saudi Ara­bia, the United Arab Emi­rates and Saudi Ara­bia af­ter the army ousted Is­lamist Pres­i­dent Mo­hamed Mursi last July.

Ford as­sem­bly line em­ploy­ees work on 3500 Du­ra­max en­gine as they move along the as­sem­bly line at the Ford Lima En­gine Plant in Lima, Ohio, March 28, 2014.

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