- Interest Rates Unchanged

The Central Bank of Malta left the central intervention rate unchanged at 4.25% during its Monetary Policy Advisory Council meeting held on 27 September.

The Governor of the Central Bank of Malta concluded that, on the basis of the information available to the Council, the current level of official interest rates provided adequate support to the exchange rate. The Bank’s external reserves increased again in September, though this latest rise was in part due to reversible inflows related to the activities of companies engaged in international business operations. At the same time, both short-term and long-term interest rate differentials in favour of the Maltese lira were broadly unchanged from the previous month’s level. Domestic financial market conditions continued to be characterized by high levels of liquidity and stable short-term interest rates.

The Governor further observed that the current monetary policy stance was supported by developments in the economy. During the second quarter GDP continued to grow at a steady pace amid expectations that this trend will be maintained during the third quarter on the strength of an increased contribution by the export sector. The recent amelioration in economic activity levels is reflected in the labour market, which witnessed further employment growth and a stable unemployment rate, and in improved consumer sentiment.

Looking ahead, the Governor noted that while the annual HICP inflation rate continued to decline, signs are emerging of upward pressure on food and fuel prices. In this context it is important to ensure that pricing practices in the markets for essential goods and services do not serve to magnify these pressures.

The Monetary Policy Advisory Council is due to meet again on 31 October 2007

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