Egypt May Maintain Key Interest Rate to Help Growth After Revolt

Egypt’s central bank will probably keep the benchmark interest rate at the lowest since 2006 as growth slows following the overthrow of President Hosni Mubarak.

The bank will hold the overnight deposit rate at 8.25 percent today, according to all five economists surveyed by Bloomberg News. The bank usually meets at 3 p.m. and announces the decision two hours later. It hasn’t changed the rate since September 2009.

The turmoil that accompanied the ouster of Mubarak in February may slow economic growth this year to 1 percent, the lowest level in almost two decades, the International Monetary Fund said. Since the uprising erupted on Jan. 25, tourists have fled, foreign investors dumped Treasury bills and factory output was hit by protests and strikes. The benchmark EGX 30 stock index is down nearly 35 percent this year.

“We’ve seen downward pressure on inflation recently,” Alia Moubayed, senior economist for the Middle East and North Africa at London-based Barclays Capital, said by telephone. “What is more important at this stage is really to ensure that growth recovers fast.”

The annual inflation rate in urban parts of Egypt declined to 10.4 percent in July, its lowest level this year, from 11.8 percent in June.

The economy shrank an annual 4.2 percent in the first quarter and investment plunged 26 percent. Cairo-based investment bank EFG-Hermes Holding SAE said on Aug. 9 that the economy may contract 3.3 percent this year instead of the 2.5 percent it estimated earlier. Previous governments have said they need growth of about 7 percent to create enough jobs for a growing working-age population.