Egypt raises key interest rates days after subsidy cuts

A customer counts his money in a bank in Cairo December 31, 2013 REUTERS/Stringer

CAIRO (Reuters) - Egypt's central bank raised key interest rates on Thursday in what was seen as an attempt to curb inflation pressures less than two weeks after the government slashed subsidies on fuel and electricity. The central bank raised the overnight deposit rate to 9.25 percent from 8.25 percent and the overnight lending rate to 10.25 percent from 9.25 percent, it said in a statement.Egypt's economy has been battered by more than three years of political turmoil since a popular uprising toppled autocrat Hosni Mubarak in 2011, driving tourists and investors away. The economy grew a relatively small 1.2 percent in the first half of 2013/14. The rate hike comes as a surprise to analysts. All five economists surveyed by Reuters in a poll conducted this week said they expected the central bank to keep rates on hold in their meeting on Thursday. "The central bank's main mandate is price stability, so probably they went after that," said Mohamed Abu Basha, an economist at EFG-Hermes who participated in the poll. Inflation, which has been gradually declining after reaching a four-year peak of 13 percent in November, is expected to rise next month after the subsidy cuts caused fuel prices to surge. Annual urban consumer inflation was steady at 8.2 percent in June but is expected to go into double digits over the coming months due to the fuel price hike, analysts have said.