Interest rates unchanged

The Central Bank yesterday decided to leave the central intervention rate unchanged at 3.25 per cent.

The decision was taken by governor Michael Bonello at the conclusion of the Monetary Policy Advisory Council meeting.

Mr Bonello recalled that in a fixed exchange rate regime with liberalised capital movements, the conduct of monetary policy is conditioned primarily by the need to preserve the currency peg.

In this context, he observed that the unchanged level of reserves in June and July suggested that the interest rate differential in favour of the Maltese lira resulting from the June cut in the bank's central intervention rate and movements in market rates abroad was appropriate in the current economic environment.

The latter is characterised by weak growth and continued uncertainty about the timing and strength of the expected recovery in external demand.

The need for a prudent stance is reinforced by the continued presence of imbalances in the fiscal position and in the current account of the balance of payments.

The Monetary Policy Advisory Council is due to meet again on August 27.