Egypt’s central bank on Thursday kept its key interest rates unchanged, setting its overnight deposit rate at 15.75 percent and its overnight lending rate at 16.75 percent.
Leaving them unchanged is “consistent with achieving the inflationary target of 9 percent” by the fourth quarter of 2020, the bank said in a statement.
Egypt’s headline inflation rate had quickened in February to 14.4 percent from 12.7 percent in January.
“Inflation edged up in February, narrowing the margin of positive real rates ahead of upcoming subsidy cuts,” said Mohamed Abou Basha, an economist with the Egyptian investment bank EFG Hermes.
Core inflation, which strips out volatile items such as food, also rose in February to 9.2 percent from 8.6 percent a month prior.
“We are heading into the Muslim holy month of Ramadan, which creates a chance that inflation would remain high in March and April,” said Allen Sandeep, head of research at Naeem Brokerage.
“So the central bank wouldn’t want to cut rates excessively without a solid reason for monetary easing,” Sandeep added.
The central bank also cited weakened global economic activity and financial tightening among its reasons for keeping rates on hold.
“Recent emerging market volatility has stopped the Egyptian pound’s appreciation and slightly increased risk aversion,” Abou Basha said.
The pound had been strengthening against the dollar since January, increasing by more than three percent, as more foreign currency flowed into Egypt in the form of tourism, government debt and export revenues.
Eight out of 12 economists polled by Reuters said the bank’s monetary policy committee was unlikely to change its rates.