The Central Bank of Malta today left the central intervention rate unchanged at 3% following today's Monetary Policy Advisory Council meeting.
The Governor of the Central Bank considered that as there were no material changes in key economic and financial indicators since the previous Council meeting, the current monetary policy stance remained appropriate. The recovery in the Bank’s external reserves continued through August and into September, while the premium on the Maltese lira widened slightly as foreign yields declined. Domestic interest rates remained stable.
The absence of pressures on the exchange rate peg suggested that domestic demand continued to be weak. Inflation fell in August, with core inflation remaining around its long-term trend level. The latest labour market indicators showed that the downward trend in unemployment was sustained, but the performance of the manufacturing and tourism industries was mixed and had yet to gather momentum.
Looking ahead, the Governor expected to see a return to positive growth during 2004 as a whole, though the rate of expansion was likely to be below the economy’s potential, while the inflation outlook was benign. In conclusion, he stressed the importance of implementing structural reforms, in the context of fiscal consolidation, to create the conditions for a more rapid rate of economic growth and to provide increased support for the exchange rate peg.
The Monetary Policy Advisory Council is due to meet again on 28 October 2004.