Investor Darling Egypt Holds Rates Amid Inflation Worries

CAIRO (Capital Markets in Africa ) – Egypt’s central bank held the benchmark deposit rate unchanged on Thursday, defying expectations of a cut as it sought to keep inflation on target.

The bank’s Monetary Policy Committee kept the overnight deposit rate at 15.75% and the lending rate at 16.75%.

Most economists surveyed by Bloomberg had predicted a cut of as much as 100 basis points, arguing that while inflation had accelerated for two consecutive months through February, the central bank could decide that a stronger pound and robust foreign inflows were enough to allow further easing — despite looming prices pressures.

The Muslim fasting month of Ramadan, which begins in May, and an ensuing holiday tend to cause a spike in food costs and the government is also expected to adjust fuel prices by the end of June.

“I’m astonished they left it as is,’’ said Dina Rofael, senior economist at Sigma Capital in Cairo. She said the recent upgrade in the country’s credit rating and the Federal Reserve forecast for no rate increases in 2019 should have given the central bank room to continue.

“When a central bank takes a decision to cut, it should be a cycle,” said Rofael. “To have an impact on the economy, there should be more than one cut taking place, one after the other.’’

Source: Bloomberg Business News