The Central Bank of Egypt (CBE) held its benchmark overnight deposit rate steady at 9.25 percent, as expected, saying the current rates were appropriate as there were both upside risks to inflation and downside risks to economic growth.
The CBE, which has held its rate steady since November 2011, said the rise in October inflation was largely driven by a sharp rise in the prices of butane gas cylinders on the back of bottlenecks in distribution channels and such bottlenecks and distortions in distribution channels posed an upside risk to inflation at a time that international food prices were less likely to rebound.
Headline inflation rose to an annual rate of 6.7 percent in October from 6.22 percent in September while core inflation rose by a monthly 1.18 percent due to sporadic rises in food prices.
Egypt's economy, measured by the Gross Domestic Product, rose by an annual rate of 3.3 percent in the second quarter, down from 5.2 percent in the first quarter, on the back of a recovery in the construction sector but continues to be suppressed by the weak manufacturing and tourism sectors.
"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 CBE said, adding the global recovery faced downside risks which affect the domestic economy.