(Adds central bank statement)
By Eric Knecht
CAIRO Feb 16 Egypt's central bank left its key
interest rates unchanged on Thursday at a meeting of its
Monetary Policy Committee (MPC), holding fire as the pound
currency strengthened to its lowest rate versus the dollar since
it was floated in November.
The bank kept its overnight deposit rate at 14.75 percent
and its overnight lending rate at 15.75 percent, it said in a
statement, the third consecutive meeting where it kept rates on
The decision comes after Egypt's core inflation rate soared
in January to 30.86 percent, its highest in more than a decade,
as the effects of the currency float and IMF-endorsed austerity
measures rippled through the economy.
The central bank quit pegging the Egyptian pound to
the dollar in November in an effort to attract foreign capital.
The pound consequently weakened from 8.8 pounds to the dollar to
roughly 20 pounds in December.
The pound has strengthened significantly in recent days
however, trading at around 16 pounds to the dollar on Thursday.
That rate is effectively its strongest since October, when
the pound was trading on a black market for dollars at a similar
price but largely unavailable at banks at the official pegged
In a statement following the rate decision, the central bank
cited higher inflation rates "strongly impacted by the
economic reform measures" but said it expects these rates to
"Consistent with the inflation outlook, the targeted
disinflation path, and given the balance of risks, the
MPC judges that the key CBE (Central Bank of Egypt) rates are
currently appropriate," the statement said.
Raising central bank rates would have done little to temper
the country's high inflation, which is largely the result of a
weaker currency, head of research at Naeem Brokerage Allen
"You would only raise rates to control inflation if it was
the result of excess currency leading to excess demand, which is
not the case here," he said.
"The central bank is being more mindful of credit growth,
which has slowed down since November."
The November currency float was part of government reforms
aimed at clinching a three-year $12 billion loan agreement with
the International Monetary Fund that included slashing
The central bank jacked up interest rates by 300 points after
the float in an effort to drain pounds from the market and
stabilise the currency, but it has left them on hold ever since.
Nine out of 13 economists polled by Reuters had forecast that it
would again keep them unchanged this month.
Average yields on Egyptian six-month and one-year Treasury
bills, meanwhile, rose at an auction on Thursday, ending a
recent rally of declining yields supported by a rush of foreign
investors buying Egyptian debt .
(Editing by Larry King)