(Bloomberg) -- Egypt left its benchmark interest rate unchanged, pausing to see if May’s biggest hike in nearly half a decade will cool galloping inflation and restore foreign investor interest in the government’s local debt.

The central bank maintained the deposit rate at 11.25% and the lending rate at 12.25%, the Monetary Policy Committee said Thursday in a statement. Only three of 13 analysts in a Bloomberg survey predicted the move.

The decision is a surprise because a spike in food and fuel prices has sent Egyptian inflation to its highest level in three years, with a devaluation of the pound in March adding to the pressures. The Arab world’s most populous nation enacted a cumulative 300 basis points of hikes since March as it grapples with the economic fallout of Russia’s invasion of Ukraine. 

After its meeting in May, the central bank said the elevated pace of price increases “will be temporarily tolerated” relative to its target of 7%, plus or minus two percentage points, on average in the fourth quarter. 

Policy makers will also be weighing the effect of recent rate increases on overseas portfolio investors in Egypt’s local debt market. The North African country saw outflows of $20 billion in 2022, as rising consumer prices eroded what had been among the world’s highest rates when adjusted for inflation.

Relief has come from Egypt’s Gulf allies, who’ve pledged more than $22 billion in deposits and investments in recent months. Authorities have promised to set new policies on government ownership to encourage more participation by private-sector investors. There are also talks with the International Monetary Fund for possible support.

Thursday’s decision may temper concern over the effect of rising interest rates on debt-servicing costs for what’s already one of the Middle East’s most indebted nations -- an issue Finance Minister Mohamed Maait addressed in an interview this week.

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