- Interest Rates Unchanged

At its monthly Monetary Policy Advisory Council meeting held today, the Central Bank of Malta left the central intervention rate unchanged at 3.25%.

The following press release was issued by the Central Bank of Malta:

"The Governor observed that the Council’s assessment did not produce any conclusive evidence to suggest that the monetary policy stance was inappropriate. While the Bank’s external reserves declined in April, this was largely due to corporate dividend payments abroad. Divergent trends were observed in interest rate differentials, with the short-term premium on the Maltese lira widening slightly and the long-term premium narrowing. Although the current level of the central intervention rate was considered appropriate, the Council nevertheless saw a continuing need for monitoring underlying trends in the external reserves in the light of financial market conditions, both locally and overseas".

"The decision to maintain the existing monetary stance was also influenced by signs of a modest economic recovery, as reflected in the latest data for merchandise exports and tourism and in business and consumer sentiment. There was also evidence that the fiscal consolidation process remains on course. On the other hand, the Council noted with some concern that inflation remains relatively high, which highlights the need to keep domestic costs under control and to ensure that competition prevails. The continuing increase in imports, partly driven by the unabated rise in oil prices and by the demand for consumer goods, also received close attention. As far as monetary policy was concerned, the Council would continue to follow these developments carefully, particularly to the extent that consumption was being financed by bank credit. Moreover, in the light of the impact of oil prices on the country’s external reserves, the Governor stressed the need for the introduction of appropriate energy conservation measures".

The next meeting of the Monetary Policy Advisory Council is due to be held on 25 May 2006.

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