Arab Today, arab today egypt\s central bank mulls slight rise in interest rates
Last Updated : GMT 16:00:00
Arab Today, arab today
Arab Today, arab today

Egypt\'s central bank mulls slight rise in interest rates

Arab Today, arab today

Arab Today, arab today Egypt\'s central bank mulls slight rise in interest rates

Cairo - Arabstoday

The Central Bank may raise interest rates when it meets later Thursday, say experts, as concerns grow over Egypt's economic stability. The bank's Monetary Policy Committee (MPC) has pushed forward its eight-time yearly meeting to today instead of Sunday due to a national holiday. It will be the MPC's last meeting in 2011. The MPC is in charge of setting Egypt’s policy overnight lending rate and deposit rates, as well as the discount rate. The three key rates have been kept unchanged at 9.75, 8.25 and 8.5 per cent respectively, since September 2009. Beltone Financial, a leading Cairo-based investment bank, says that policy rates will likely remain unaltered. But a note from the bank this morning said there is a slight chance the CBE could opt to increase its policy rates a notch, either during this meeting or in its next scheduled one in February. An increase in rates could be intended to ease pressures on the Egyptian pound, which has been squeezed since the 25 January uprising, as fears of political instability have driven an increase in withdrawals and made people reluctant to deposit funds in the banking system. Beltone says that Egypt's current instability is expected to intensify pressures on the Egyptian pound, either in the form of dollarisation or in further bank withdrawals. "The CBE could therefore be inclined to raise interest rates to protect the local currency deposits, and to a certain extent, the EGP (Egyptian pound), especially that the CBE is running out of international reserves to support the currency," the bank's note explains.   On 2 November, Egypt’s two biggest public sector banks, National Bank of Egypt (NBE) and Banque Misr (BM), raised interest rates on their Egyptian pound three-year certificate of deposits (CD). Rates climbed from 9.5 to 11.5 per cent. Beltone warned, however, that an increase in interest rates would do little to correct Egypt's slow economic growth and the weak credit it offers to the private sector.

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