Interest rates unchanged

The Central Bank yesterday left the central intervention rate unchanged at four per cent.

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

In a statement, the Central Bank said the Governor concluded that, at their current level, official interest rates offered adequate support to the exchange rate peg.

The January increase in the central intervention rate had contributed to the strong growth in Maltese lira deposits observed in February, while both money and capital market interest rate differentials in favour of the Maltese lira had remained stable.

Although the Bank's external reserves fell further going into March, the available evidence suggests that a major factor was again the conversion of domestic currency holdings into euro in anticipation of euro adoption.

The monetary policy stance also appeared appropriate in the light of the observed deceleration in the rate of private sector credit growth, so far, this year and the absence of domestically induced inflationary pressures. In fact, consumer price inflation fell further in February.

The Council also noted that GDP data show steady expansion in economic activity in the final quarter of 2006, with more recent statistical information indicating an improvement in the tourism industry and the persistence of stable labour market conditions.

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