Cairo: Egypt’s central bank is expected to keep interest rates on hold on Monday, a Reuters poll showed, in an attempt to balance inflationary pressures and the need to stimulate an economy suffering from more than three years of stagnation.
Inflation has slowed since reaching its highest in nearly four years, at 13 per cent, last November. But it grew in July after the government introduced fuel price increases.
At their last meeting on July 17, the central bank raised benchmark interest rates in an unexpected move seen as an attempt to hold down inflation after the fuel hike.
It raised the overnight deposit rate to 9.25 per cent from 8.25 per cent and the overnight lending rate to 10.25 per cent from 9.25 per cent.
All five economists polled by Reuters said they expected the central bank to keep rates on hold at its monetary policy meeting on Sept. 1.
“The central bank caused a surprise when it hiked interest rates by 100 basis points in July. The move appeared to have pre-empted the sharp rise in inflation following last month’s decision by the government to raise energy prices,” said Jason Tuvey, Middle East Economist at Capital Economics.
Egypt’s economy has suffered since a popular uprising toppled autocrat Hosni Mubarak in 2011, driving foreign investors and tourists away. Political upheaval continued last year when the country’s first elected president was ousted by the army after mass protests against his rule.
“While the economy is recovering from last summer’s political upheaval, growth is still sluggish. And last month’s rate hike is just another reason to think that the recovery will be slow-going,” Tuvey said.
The economy grew 1.2 per cent in the first half of 2013/14, far too little to reduce widespread unemployment. Despite billions of dollars in aid from Gulf allies in the past year, Egypt’s economic recovery has been sluggish and growth forecasts for this year range between 2 and 2.5 per cent.