Egypt central bank keeps rates on hold

CAIRO (Reuters) - Egypt's central bank kept interest rates unchanged on Thursday, weighing inflation risks against slower economic growth, with both factors driven by investor worries about the country's political crisis.

Egypt's pound has lost almost 8 percent of its value against the dollar in the past month, raising inflation pressures. But the fall has been linked to concerns about widespread violence and political turmoil, which has also hurt the economic outlook, keeping demand subdued.

The bank kept its rate for overnight deposits at 9.25 percent and its overnight lending rate at 10.25 percent.

The economy has been hammered by two years of unrest. Street clashes in the past week killed more than 50 people, adding to investor worries and adding fresh concerns for tourists.

"While the slowdown in economic growth has been limiting upside risks to the inflation outlook, there are possible upward pressures on inflation going forward," the bank said after its Monetary Policy Committee met.

"Given the mixed balance of risks surrounding the inflation and GDP outlooks and the uncertainty at this juncture, the MPC judges that the current key Central Bank of Egypt rates are appropriate," it added in the statement on its website.

The bank noted an uptick in inflation in December, saying that local supply bottlenecks and distortions in distribution channels "in addition to exchange rate risks, pose upside risks to the inflation outlook."

It said there were signs of a nascent recovery in recent months in the economy, lifted by the construction sector, but noted weakness in the manufacturing and tourism sectors.

Looking ahead, "the current political transformation may continue to have ramifications on both consumption as well as investment decisions, adversely weighing on key sectors within the economy," it said.

Source: http://news.yahoo.com/egypt-central-bank-keeps-rates-hold-062120465--business.html

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