Central Bank leaves interest rates unchanged

The Central Bank yesterday left the central intervention rate unchanged at 4.25 per cent.

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

The Central Bank said the Governor concluded that, on the basis of the information available to the council, the present level of official interest rates provided adequate support to the exchange rate.

The Central 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 lira were broadly unchanged from the previous month's level. Domestic financial market conditions continued to be characterised by high levels of liquidity and stable short-term interest rates.

The Governor observed that the monetary policy stance was supported by developments in the economy. In the second quarter, GDP continued to grow at a steady pace amid expectations that this trend will be maintained in 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 October 31.