Central intervention rate remains at three per cent

The Central Bank of Malta has left the central intervention rate unchanged at three per cent.

Central Bank governor Michael C. Bonello noted after a meeting of the Monetary Policy Advisory Council yesterday that although the premium on the lira remained stable the upward trend in the Central Bank's external reserves appeared to be levelling off, as the October increase was more than offset by a decline going into November.

This development was largely attributable to the continuing sluggishness in external demand and its impact on Malta's export sector, Mr Bonello said.

From this perspective, current interest rate levels remain sufficiently supportive of the exchange rate peg. This monetary policy stance was also justified in a domestic economic environment characterised by a low rate of inflation, falling consumption and rising unemployment.

Mr Bonello also welcomed the medium-term fiscal consolidation programme announced in the budget speech and the plans to reach a broad social consensus on welfare reform.

"Success in this regard is a prerequisite for restraining growth in public expenditure. This should also favour a more efficient allocation of resources and, by containing pressures on the reserves, complement the bank's monetary policy strategy," Mr Bonello added.

The council is due to meet again on December 29.