Egypt holds rates before new cuts in subsidies

Egypt’s central bank left interest rates unchanged for a second meeting on Thursday night as it faces a potential resurgence in inflationary pressures from a fresh wave of subsidy cuts.

The Monetary Policy Committee kept the overnight deposit rate at 15.75 per cent and the lending rate at 16.75 per cent — a decision predicted by all but one of 11 economists surveyed by Bloomberg. Cairobased investment bank EFG Hermes has said the pause may extend beyond the summer.

A slowing global economy, trade tensions and volatile oil prices caused by geopolitical hazards all “pose risks to the domestic inflation outlook,” the central bank said in a statement.

The Arab world’s most populous country has cut rates just once in the past year as it moved to tame inflation stemming from a 2016 devaluation of the pound and a sweeping International Monetary Fundbacked overhaul of the economy. Annual inflation rocketed to more than 34 per cent before easing back last year.

Inflation decelerated for a second straight month in April, reaching an annual 13 per cent, down from 14.2 per cent in March, as the government boosted food supplies to avoid the price spikes that typically accompany Ramadan.

Price pressures, though, are likely to resurface with cuts to fuel subsidies due in June.

The central bank, which has yet to set an inflation target for the current year, is aiming to bring price growth down to 9 per cent, plus or minus 3 percentage points, in the fourth quarter of 2020.