During today's Monetary Policy Advisory Council meeting the central intervention rate was left unchanged at 3%. The Central Bank of Malta issued the following press release after the meeting.
The Governor considered that the central intervention rate remained appropriate at its current level in the absence of pressures on the exchange rate peg. The underlying level of the Bank’s external reserves was stable, while the premium on the Maltese lira widened marginally as long-term yields abroad eased and domestic interest rates remained largely unchanged.
The Governor noted that although the economy was expected to expand modestly during 2004, the recovery remained fragile. The sharp rise in oil prices on international markets was likely to dent external demand and would put pressure on domestic prices through higher energy costs. He stressed that these costs had to be absorbed by the country as a whole, without unduly burdening the productive sectors.
To further safeguard competitiveness, moreover, it was important not to allow the higher energy costs to generate secondary price effects, particularly at a time when inflation was already relatively high. The Governor, therefore, appealed for wage moderation and the containment of administrative and other charges. In this light, the process of fiscal consolidation, which was a pre-requisite to achieve macro-economic stability, should primarily be pursued through measures aimed at reducing Government expenditure.
The Monetary Policy Advisory Council is due to meet again on 29 November 2004.