(Bloomberg) -- Egypt left interest rates unchanged, putting monetary easing on pause amid fears over the effect of a new strain of the coronavirus on global markets.
The Monetary Policy Committee held the deposit rate at 8.25% and the lending rate at 9.25%, it said Thursday in a statement. The decision was predicted by all 14 economists surveyed by Bloomberg after authorities cut rates by a cumulative 400 basis points this year.
Along with the pandemic, the central bank was also weighing an uptick in November inflation to 5.7%, its highest level in seven months. Despite the increase, the North African nation's real-interest rate is second-highest only to Malaysia among more than 50 major economies tracked by Bloomberg -- a key factor in attracting foreign inflows to its local debt market.
Average inflation in the fourth quarter of 2020 is likely to come under the target floor of 6%, the MPC said, adding that Egyptian economic growth is “expected to recover albeit gradually, with structural measures expected to support economic activity.”
Overseas holdings in the country's Treasury bills and bonds rose to $24 billion in November from $10.4 billion at the end of May, bouncing back after a virus-related selloff in spring and encouraged by recent agreements with the International Monetary Fund. Two of Egypt's main other sources of foreign currency -- tourism and Suez Canal receipts -- have taken hits from the pandemic.
Authorities have room to resume monetary easing in 2021, but “the timing and magnitude of the cuts are completely reliant on volatility in global markets,” Radwa El-Swaify, head of research at Cairo-based Pharos Holding, said before the decision.
Inflation rates will probably “be affected by unfavorable base effects related to the normalization of monthly inflation rates in 2021,” but will remain around a target of 7%, plus or minus two percentage points, for the fourth quarter of 2022, it said.
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