(Bloomberg) -- Egypt kept interest rates at a record high as it weighs the effects of a new round of subsidy cuts and awaits the completion of a key International Monetary Fund review.
The central bank maintained the deposit rate at 27.25% and the lending rate at 28.25%, its Monetary Policy Committee said Thursday in a statement. The decision was correctly predicted by all eight economists surveyed by Bloomberg.
Authorities hiked rates by 8 percentage points in two steps early this year, but they’re exercising caution after raising the prices of fuel products by an average of 9.2% in October. The move is part of an IMF-backed reform program that seeks to reduce subsidies and improve government finances.
While Egyptian inflation has begun to reflect the country’s third fuel adjustment of 2024, a fuller picture will only become clear when the next data is released in December.
Egypt’s fifth consecutive rate hold came after an IMF mission visited Cairo this month for the latest review of the North African nation’s expanded $8 billion program. On Wednesday, the lender said there’d been “substantial progress” in discussions, but more talks would be held in the coming days.
Authorities were likely to leave rates untouched until Egypt passes the review, according to Jean-Michel Saliba of Bank of America Corp. The step would unlock a $1.3 billion loan tranche.
“Markets are not yet aware whether the fourth review will conclude on time or be delayed,” Saliba said before the decision, adding that “relatively unfavorable inflation prints” are also a factor.
Consumer prices rose 26.5% in October versus 26.4% the month before. The index is likely to accelerate again in November, reflecting both the fuel increase and a hike in cigarette prices by Egypt’s largest tobacco producer.
Most economists see the regulator waiting until at least the end of the first quarter of 2025 before beginning an easing cycle.
--With assistance from Abdel Latif Wahba.
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