The Central Bank of Egypt left key interest rates unchanged when it met on Thursday, according to a CBE statement (pdf). Overnight deposit and lending rates remain at 16.75% and 17.75%, respectively, with the discount rate also unchanged at 17.25%. The MPC said it still sees Egypt hitting its inflation target of c. 13% in 4Q2018 and single digits thereafter, but signaled downside risk from expected cuts to energy subsidies this summer as well as surging global oil prices and “the pace of tightening financial conditions” globally (read: US interest rate hikes). The move came days after preliminary data showed core inflation basically flat at 11.62% in April from 11.59% in March.

Look for a transient spike in Inflation as the government cuts fuel and energy subsidies further in July. “The measures have the potential to undercut progress the central bank has made in lowering annual inflation that had surged to more than 33% following the 2016 decision to float the currency,” Bloomberg notes. This forces the central bank to adopt a more cautious approach, especially as “the recent rise in US yields could complicate the timing of cuts further,” said Standard Chartered Bank’s Bilal Khan.