By Abdel Latif Wahba and Alaa Shahine

July 9 (Bloomberg) -- Inflation in Egypt eased to its slowest pace in 18 months, giving the central bank more room to keep its key interest rate at its low...

  By Abdel Latif Wahba and Alaa Shahine   July 9 (Bloomberg) -- Inflation in Egypt eased to its slowest pace in 18 months, giving the central bank more room to keep its key interest rate at its lowest level in a year and a half.   Urban inflation, the benchmark rate that the central bank monitors, slowed to 9.9 percent in June from 10.2 percent in the previous month, the Cairo-based Central Agency for Public Mobilization and Statistics said today on its Web site.   “We believe the Central Bank of Egypt will hold on rates for the remainder of the year,” Reham El-Desoki, a senior economist at investment bank Beltone Financial, said in an e- mailed statement before the announcement. Inflation in the second half of the year may accelerate, El-Desoki said.   Egypt’s M2 money supply growth, an indicator of future inflation, rose to 8.5 percent in May from 6.8 percent in April. Food prices usually rise ahead of the holy Muslim month of Ramadan, during which Muslims hold large banquets after breaking their fasts at sunset. Food makes up 47 percent of the consumer price index in Egypt. Ramadan begins in the second half of August.   The central bank lowered its overnight deposit rate by half a percentage point in June to 9 percent, the fourth cut this year. The bank reduced its overnight lending rate by the same measure to 10.5 percent. It will meet again on July 30 to review its rate decision.   The impact of the cut was blunted as the majority of banks did not lower their interest rates “to avoid further deterioration in returns on deposits for the household sector,” Beltone Financial said.   The Egyptian economy probably grew by as much as 4.7 percent in the fiscal year that ended last month, Finance Minister Youssef Boutros-Ghali said on July 5, as the global financial crisis hurt revenue from tourism and the Suez Canal. The economy expanded 7.2 percent in the previous year.