The Central Bank of Egypt kept its benchmark overnight deposit rate unchanged at 9.25 percent, saying there are still downside risks to the country's economy and cautioned that higher food prices could threaten the outlook for inflation.
Egypt's inflation rate eased to 6.2 percent in September from 6.47 percent in August, mainly due to favorable base effects. The core inflation rate fell to an annual rate of 3.8 percent from 5.3 percent - the lowest level since May 2006 - but the bank was still concerned over higher global food prices.
"It is important to underscore that if the latest pick up in international food prices proves to be persistent this would pose and upside risk to the inflation outlook along with the re-emergence of local supply bottlenecks and distortions in the distribution channels," the bank said in a statement after a meeting of its Monetary Policy Committee.
The central bank has kept its overnight deposit rate unchanged since November last year, when it was raised by 100 basis points.
Egypt's Gross Domestic Product expanded by an annual 3.3 percent in the second quarter, down from 5.2 percent in the first quarter, and the central bank said there was continued weakness in the manufacturing and tourism sectors, which suppressed signs of recovery in the construction sector.
"Looking ahead, the current political transformation may continue to have ramifications on both consumption as well as investment decisions, adversely weighing on key sectors within the economy," the central bank said, adding:
"Moreover, downside risks continue to surround the global recovery on the back of challenges facing the euro area. These factors, combined, pose downside risks to domestic GDP going forward."
Last year Egypt's economy expanded by only 1.8 percent as political turmoil hit tourism earnings and manufacturing. Later this month a delegation from the International Monetary Fund will be visiting Egypt to discuss a $4.8 billion loan.