The Central Bank of Egypt (CBE) will probably keep its benchmark interest rate at the lowest level since November 2006 for the fourth consecutive meeting as core inflation remains subdued. The CBE's Monetary Policy Committee will keep the overnight deposit rate at 8.25 per cent, according to eight economists surveyed by Bloomberg. One economist predicted a quarter-point increase. "With the core consumer price index remaining within the the CBE's comfort zone for nine consecutive months now and headline inflation also inching down from earlier highs, we expect the central bank to leave rates on hold," Deutsche Bank AG said in a note before the announcement. "We expect rates on hold through all of 2010." Core inflation, which excludes the cost of fruits and vegetables as well as administered prices, eased to 6.9 per cent in February from 7.4 per cent the month before. The central bank said on Feb. 4 that inflation is within its "comfort zone," without saying what that range is. The bank has said it won't set an inflation target until it has more tools to manage price growth. The rate of headline urban inflation fell to 12.8 per cent in February from 13.6 per cent a month earlier. The economy of the most populous Arab country expanded 5.1 per cent in the last three months of 2009, compared with 4.6 per cent in the previous three months. The government expects gross domestic product to grow more than five per cent in the fiscal year through June, from 4.7 per cent a year earlier. The CBE reduced interest rates six times in 2009 to support economic growth, which fell below the average of seven per cent achieved in the three fiscal years to June 2008 as the global financial crisis hurt revenue from tourism and foreign direct investment. The Monetary Policy Committee will probably reiterate tomorrow that current interest rates are suitable to support the economy, while maintaining price stability, said Reham el-Desouqi, a senior economist at Cairo-based investment bank Beltone Financial. With economic growth accelerating, interest rates may begin to rise soon, said Mona Mansour, director at CI Capital research in Cairo, who predicted a quarter-point increase tomorrow. "Inflation is still considered high even if it came down," she said in a telephone interview today. "If they don't raise rates tomorrow, they will do it next time."
