Monetary Policy Advisory Council - Interest Rates Unchanged

Thursday, July 28th, 2005

The Central Bank of Malta today left the central intervention rate unchanged at 3.25%. The decision was taken by the Governor at the end of the Monetary Policy Advisory Council meeting held yesterday.

The Governor observed that financial market conditions indicated that, at their current levels, official interest rates provided adequate support to the exchange rate. The stabilisation in the Bank’s external reserves, which began in May, was maintained going into July. Meanwhile, the premium on the Maltese lira narrowed slightly, reflecting stable domestic market yields and a marginal rise in rates in the euro area. Investor sentiment remained favourable, as shown by the strong response to the issue of government bonds on the primary market.

New information on the performance of the Maltese economy since the previous Council meeting was limited and did not permit conclusions to be drawn with respect to possible changes in trends. It appears, therefore, that the economy continues to operate below optimal levels and that fiscal and external imbalances persist. As regards the latter, the Governor noted that the observed shift in consumption patterns towards imports points strongly to the need to expand Malta’s export-earning capabilities and to restrain the fiscal shortfall in order to reduce the deficit on the current account of the balance of payments to more sustainable levels.

The Monetary Policy Advisory Council is due to meet on 25 August 2005.

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