(Adds details and context)
CAIRO Jan 16 Egypt's central bank kept its
official interest rates on hold as expected at a monetary policy
committee meeting on Thursday, as the government tries to
stimulate the economy while keeping inflation in check.
Egypt's economy has been battered by three years of
political instability since a popular uprising ousted autocrat
Hosni Mubarak in 2011, causing tourists and investors to flee.
Egypt's gross domestic product (GDP) grew a meagre real 1.04
percent in the first quarter of this fiscal year - the three
months to Sept. 30 - compared with 2.1 percent in the same
quarter of last year, the central bank said in a statement.
GDP grew 2.1 percent in the previous fiscal year, too little
to make an impact on youth unemployment, estimated at over 20
"The pronounced downside risks to domestic GDP combined with
the persistently negative output gap since 2011 will limit
upside risks to the inflation outlook going forward," the bank
"Given the mixed balance of risks surrounding the inflation
and the GDP outlooks at this juncture, the Monetary Policy
Committee judges that the current key CBE rates are
appropriate," it said.
The bank kept its deposit rate at 8.25 percent and its
lending rate at 9.25 percent. It also kept its discount rate and
the rate it uses to price one-week repurchase and deposit
operations at 8.75 percent, the bank said in a statement on its
Five of seven economists in a Reuters survey had forecast
the bank would leave its overnight rates unchanged. Two expected
another 50 basis point reduction.
At its previous monetary policy meeting on Dec. 5 the
central bank had unexpectedly cut its key interest rates by 50
basis points, saying it was more concerned about boosting growth
than taming inflation.
Core inflation dipped slightly to 11.91 percent in the year
to December from 11.95 percent in November.
However, the central bank is also under pressure to keep
interest rates high to attract foreign funds into the Egyptian
pound. The bank has spent tens of billions of dollars supporting
its currency since the 2011 uprising which hammered tourism
revenues and foreign investment.
Egypt's cabinet, appointed after the ouster of the Islamist
President Mohamed Mursi from power on July 3 following mass
protests against him, has announced a 29 billion Egyptian pound
($4.2 billion) stimulus package to revitalise the economy.
Finance Minister Ahmed Galal in December said Egypt plans to
spend around 30 billion pounds on a second stimulus package that
will be launched in January.
Gulf countries have pledged more than $12 billion in aid to
Egypt since July.
($1 = 6.9622 Egyptian pounds)
(Reporting by Asma Alsharif; Editing by Kevin Liffey and Toby