Egypt's central bank kept its benchmark interest rate Thursday at the lowest level since November 2006 for the third consecutive meeting after economic growth slowed and the inflation rate remained at a one-year high. The overnight deposit rate was kept at 8.25 per cent and the overnight lending rate at 9.75 per cent, the Cairo-based central bank said in a statement on its Web site today. Nine of 10 economists surveyed by Bloomberg had predicted the decision, while one forecast a quarter-point increase. The central bank will leave rates unchanged to “continue supporting economic growth and begin raising them during the second half of 2010,” Cairo-based investment bank HC Securities and Investment Co. said in a note to clients before today's decision. The central bank reduced rates six times in 2009 to help the economy of the most populous Arab country face the global financial crisis. Growth slowed to 4.5 per cent in the last quarter of 2009 from 4.9 per cent in the previous three months, Economic Development Minister Osman Mohamed Osman said in an interview on Jan. 6, citing preliminary data. Growth remains below the average 7 per cent in the three fiscal years through June 2008 after the global financial crisis hurt revenue from tourism, the Suez Canal and foreign direct investment. Urban inflation, the benchmark rate that the central bank monitors, was unchanged in December at 13.2 per cent, the highest since February 2009. Core inflation, which excludes the cost of fruits and vegetables as well as regulated prices, accelerated to 6.85 per cent in the same month from 6.59 per cent in November. “The central bank would want to remain focused on keeping inflation in check, though it is not problematic as yet,” Alia Moubayed, a London-based senior economist at Barclays Capital, said by e-mail before the announcement. In its last two statements, the central bank said it would not hesitate to change its policy on rates to ensure price stability. “Although their new measure of core inflation shows limited upward pressures, there are still signs that activity is picking up and that inflationary pressures are biased to the upside,” Shahin Vallee, a London-based emerging markets strategist at BNP Paribas SA, said by e-mail. He was forecasting a 25 basis point increase. “An interest rate hike would send negative signals to the equity market,” HC Securities said. Egypt's benchmark EGX30 stock index gained 13.4 per cent in the year to Thursday's close, led by Orascom Telecom Holding SAE, which gained 35.5 per cent.
