CAIRO, July 26 (Reuters) - Egypt's central bank is expected
to maintain its key interest rates unchanged at a policy meeting
later on Thursday as worries over the local currency prevent it
from doing more to support the weak economy.
All seven economists in a Reuters survey forecast that
Thursday's meeting would conclude with overnight rates unchanged
at 10.25 percent for lending and 9.25 percent for deposits.
"We see rates the same for the rest of the year," said
economist Alia Mamdouh at CI Capital in Cairo. "The main purpose
is to defend the pound. We don't expect huge capital inflows so
we see maintained pressure on the currency."
A popular uprising last year hammered the economy by chasing
away tourists and foreign investors and sparking a series of
worker strikes for higher wages.
Egypt's gross domestic product (GDP) growth slowed to around
2 percent in the 2011/12 financial year from 5 percent or more
in previous years. Economists see growth of around 3 percent
this year.
Recovery is being hampered by a continued lack of political
stability which has kept foreign investors away and dampened
prospects for effective policies to deal with the weak economy.
"The persistent uncertainty on the political and
macroeconomic outlook in the short to medium-term is still a
drag on growth recovery and a source of downside risks to the
currency," said Alia Moubayed, a senior economist at Barclays
Capital, which forecast no change in rates.
The government has been selling its foreign reserves to
support the pound, partly out of concern that a more expensive
dollar would increase the cost of imports and boost inflation.
Urban consumer price inflation, the most closely watched
indicator of prices, has slowed in recent months, easing to 7.2
percent in the year to June from 8.3 percent in May.
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Central Bank of Egypt website http://www.cbe.org.eg
Forecasts were from Bank of America Merrill Lynch, Barclays
Capital, Capital Economics, CI Capital, Citi, HSBC and UBS.
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(Reporting by Tom Pfeiffer. Editing by Jeremy Gaunt.)
