Egypt's C.Bank Keeps Key Interest Rates Steady

Egypt's central bank kept its benchmark overnight deposit and lending rates steady, warning that although economic growth was feeble, there was a risk that inflation might accelerate. The bank's Monetary Policy Committee (MPC) left its lending rate unchanged at 10.25 percent and the deposit rate at 9.25 percent after its regular meeting, it said on its website.

Gross domestic product grew by only 0.3 percent in the final quarter of 2011 after similarly weak second and third quarters and a 4.3 percent contraction in the first, the MPC said in a statement accompanying its decision. "The re-emergence of local supply bottlenecks and distortions in the distribution channels, as well as the probability of a rebound in international food prices pose upside risks to the inflation outlook," the MPC said.

Urban consumer price inflation, the most closely watched indicator of prices, eased slightly to 9 percent year-on-year in March from 9.2 percent in February. Core annual inflation, which strips out subsidised goods and volatile items including fruit and vegetables, quickened to 8.68 percent in the year to March from 7.3 percent in February. All six economists in a Reuters survey had forecast the meeting would hold overnight rates unchanged. The bank also left the discount rate unchanged at 9.5 percent and the seven-day repurchase agreement (repo) rate at 9.75 percent. Some analysts believe the economy contracted last year for the first time since the 1960s amid the turmoil of the country's popular uprising.

Growth is forecast at around 3 percent for 2012, less than the average 5 percent a year recorded over the last decade. The government has not yet released growth figures for the first quarter of 2012 or inflation figures for April. The central bank has kept monetary policy unchanged since November, when it unexpectedly raised interest rates for the first time in more than two years. Analysts said then that the increase was intended to support the Egyptian pound currency, under pressure from a slump in tourism and foreign investment following the political turmoil that ousted Hosni Mubarak.