Egypt's central bank kept its main interest rates unchanged at a policy meeting on Thursday but said it was keeping an eye on the risks to recovery posed by mounting concerns about the global economy and fears of a resurgence in European debt problems.
The bank kept overnight deposit and lending rates unchanged at 9.25 percent and 10.25 percent respectively, as forecast by a Reuters poll. Inflationary pressure has begun to ease after a spike following cuts to energy subsidies in July while the economy is showing signs of strengthening recovery.
"Looking ahead, while investments in domestic mega projects such as the Suez Canal are expected to contribute to economic growth, the downside risks that surround the global recovery on the back of challenges facing the Euro area and the softening growth in emerging markets could pose downside risks," the bank said in a statement after the meeting.
Egypt's economy has been in turmoil since a popular uprising ousted autocrat Hosni Mubarak in 2011, deterring tourists and foreign investors and straining the country's finances.
To help bring down its swelling budget deficit, the government in July slashed energy subsidies, raising energy costs for companies and consumers by up to 78 percent.
That pushed up prices and hit business activity in July. But the effect appears to have been short-lived.
Urban consumer inflation eased to 11.1 percent in September after surging to 11.5 percent in August in the wake of cuts to fuel and electricity subsidies. Core inflation eased to 9.15 percent in September from 10.07 percent the previous month.
The bank said it was seeking to keep a lid on inflation without derailing the fragile economic recovery.
Rising concerns about the outlook for the global economy have triggered a sell-off in global financial markets this week and pose a risk to Egypt's economy just as it is improving.
In the last quarter, gross domestic product grew 3.7 percent from a year earlier, suggesting the recovery was gaining strength. A recent Reuters poll forecast growth could reach 3.3 percent this fiscal year as Egypt pushes ahead with big projects such as a Suez Canal expansion.
The government hopes the project can turn the canal into an international industrial and logistics hub that will create jobs and restore confidence.
The central bank raised benchmark interest rates at its meeting on July 17 to keep inflation in check after the cuts to electricity and fuel subsidies. It kept rates on hold at its last meeting in September.
