Central intervention rate unchanged

The Central Bank of Malta yesterday left the central intervention rate unchanged at 3.25 per cent.

The decision was taken by the Governor at the end of the Monetary Policy Advisory Council meeting.

Explaining his decision, the Governor, Michael Bonello, noted that the increase in the central intervention rate on April 8 had been duly transmitted to money market interest rates and to bank deposit and lending rates, but that it was still too early to assess the full impact of the decision.

There were signs that the decline in the bank's external reserves had slowed down in April, but it was unlikely that this was a related development, the Governor said.

Moreover, the structural factors that prompted the bank's recent action to raise interest rates, notably the strong growth in lending to the personal sector and the imbalance between saving and spending, were still present.

Data for the first two months of the year point to a wider trade gap, in which a weak export performance also played an important part.

Mr Bonello drew attention to the limitations that monetary policy faced in addressing structural imbalances and reiterated the need for complementary policies and reforms aimed at containing costs, including labour-related costs, and for achieving productivity gains.

He also expressed concern at what appeared to be the relatively high level of domestically generated inflation at a time of subdued economic activity.

The Monetary Policy Advisory Council is due to meet again on May 26.