During its monthly meeting held on 27 August, the Monetary Policy Advisory Council left the central intervention rate unchanged at 4.25%.
The Deputy Governor of the Central Bank of Malta considered that there were no developments since the previous meeting that would justify a change in the Bank’s monetary policy stance. The Central Bank’s external reserves recovered moderately in August reflecting seasonal inflows and the receipt of privatisation proceeds. Domestic financial markets were unaffected by uncertainty in market conditions abroad, with the Bank continuing to absorb excess liquidity in its weekly money market operations. Both short-term and long-term interest rate differentials in favour of the Maltese lira remained stable. While currency in circulation fell further in July, Maltese lira deposits expanded strongly. The latter also highlighted the relative attractiveness of domestic assets and indicated continued confidence in the exchange rate peg following the setting of the permanent conversion rate for the Maltese lira against the euro early in July.
The Monetary Policy Advisory Council noted that the latest indicators pointed to a continued positive performance of the Maltese economy. Inflation decreased slightly, while labour market conditions were stable. On the external front, the merchandise trade gap narrowed again in June and activity in the tourism industry gathered pace. The fiscal position during the first half of the year was broadly stable.
The next Monetary Policy Advisory Council meeting is scheduled to take place on 27 September 2007.