Bloomberg News

Egypt Keeps Interest Rates Unchanged to Help Economic Growth

October 13, 2011

(Updates with economist’s comment in third paragraph.)

Oct. 13 (Bloomberg) -- Egypt’s central bank kept its benchmark interest rate at the lowest level in almost five years to help the economy after the uprising that ousted Hosni Mubarak.

The Monetary Policy Committee left the key overnight deposit rate at 8.25 percent and the overnight lending rate at 9.75 percent, the central bank said on its website. All five economists surveyed by Bloomberg anticipated the decision. The bank hasn’t changed either rate since September 2009.

“They’re trying to attract domestic investment and in order to attract domestic investment, this is one kind of incentive,” Alia Mamdouh, an economist at Cairo-based investment bank CI Capital, said by telephone. “Inflationary pressures have started to ease and as long as growth is slowing, the risk of upside inflationary pressure is very low.”

The Egyptian economy is struggling to recover from the aftermath of this year’s turmoil, as tourists shun the country and factory output is hit by strikes. Gross domestic product grew 1.8 percent in the fiscal year that ended June 30, the lowest for at least a decade. The benchmark EGX 30 stock index is down more than 40 percent this year.

Inflation slowed to 8.2 percent last month from 8.5 percent as food prices, one of the causes of the unrest that toppled Mubarak, rose at a slower pace.

The central bank’s decision comes after Oct. 9 clashes between Christian protesters and security forces that left at least 25 people dead.

The violence will “likely have material repercussions on the balance of payments, foreign reserves and domestic liquidity during the rest of Q4-2011 and possibly beyond,” Cairo-based Pharos Holding for Financial Investments said in a note yesterday.

--Editors: Ben Holland, Heather Langan.

To contact the reporters on this story: Mariam Fam in Cairo at mfam1@bloomberg.net; Mahmoud Kassem at mkassem1@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden in Dubai at barden@bloomberg.net.


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