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Cairo: Egypt's central bank raised interest rates for the fifth time this year to tame inflation running at over 20 per cent, increasing both deposit and lending rates by 50 basis points, the bank said on Friday.
The moves take its overnight deposit rate to 11 per cent and its overnight lending rate to 13 per cent. It also increased the discount rate by 100 basis points to 11 per cent.
The central bank's monetary policy committee said domestic food price inflation was broadly unchanged in June but it sought to stop global commodity price inflation (MPC) from driving up other costs.
"The MPC remains concerned about possible propagation of food inflation to non-food inflation," the central bank's Monetary Policy Committee said in a statement.
"Having weighed both the international and domestic information available, today's [Friday's] decision is aimed at containing inflation expectations," it said. The bank last raised rates on June 27.
Egypt has said that bringing inflation down is a high priority for the most populous Arab country, where low wages and soaring food and fuel prices triggered violent protests in some areas earlier this year.
The central bank moves were in line with forecasts by analysts, who had expected a rise of 25 or 50 basis points. They said the rate rises suggested the bank expects July data to show higher inflation, despite some signs pressures might be easing.
Egyptian urban inflation rose to 20.2 per cent in the year to June, but overall price increases slowed on a monthly basis with food and beverage prices rising just 0.8 per cent for the month compared with 3.6 per cent previously. Reham Al Desoki, senior economist at investment bank Beltone Financial, said: "Now that they have raised rates by 50 basis points, we can expect that the July CPI, which will be announced on Sunday, will be significantly high. I think the monthly rise in the CPI is going to be stronger than last month's and the month before."
Egypt's central bank said it would not hesitate to adjust rates again to ensure medium-term price stability. It has raised rates by a total of 2.25 percentage points this year as rising prices emerged as a tough challenge for the government, which increased fuel prices in May to help finance pay raises for public sector employees.
The central bank said global market developments such as a decline in wheat prices from recent record levels suggested the international food price shock might be waning, but the outlook was still uncertain.
"This, in turn, remains a key upside risk to the domestic inflation outlook which is exacerbated by downward price rigidities in domestic markets," the bank said.
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