CAIRO: Egypt’s central bank unexpectedly cut its key interest rates by 50 basis points each at a monetary policy committee meeting Thursday, saying it was more concerned about boosting growth than taming inflation.
The economy has yet to recover from the popular uprising that ousted President Hosni Mubarak in 2011. Gross domestic product grew just 2.1 percent in the year to June 30, too slow to make an impact on youth unemployment, estimated at over 20 percent.
Urban consumer price inflation, meanwhile, hit 10.44 percent in October – its highest since July 2011 and up from 10.15 percent in September.
The bank cut its overnight deposit rate to 8.25 percent and its overnight lending rate to 9.25 percent. It also cut its discount rate and the rate it uses to price one-week repurchase and deposit operations to 8.75 percent.
The interim government launched a 29.6 billion Egyptian pound ($4.3 billion) stimulus package, aided by over $12 billion in aid pledged by Arab Gulf countries, after the army ousted Islamist President Mohammad Morsi in July following mass protests against his rule.
The central bank remains concerned about high inflation, however, which may eventually lead it to raise interest rates.
The weak Egyptian pound is another problem for the bank, which had been under pressure to keep rates high to attract foreign investors and help fund the country’s large current account deficit.
The pound has slumped since the 2011 uprising, which chased away tourists and investors, two main sources of foreign exchange, and has been trading weaker than official rates on the black market.