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 yesterday.

The Governor concluded that, at their current levels, official interest rates provided adequate support to the exchange rate peg, the bank said.

The bank's external reserves increased sharply this month, though this was due to the extension of minimum reserve requirements to credit institutions that operate predominantly with non-residents ahead of the entry into force of the relevant Eurosystem regulation.

Excluding this factor, the external reserves continued to follow a moderate downward trend, which partly reflected the conversion of Maltese lira holdings into euro.

Interest rate differentials in favour of the Maltese lira were broadly unchanged in a domestic financial market that continued to be characterised by stable conditions.

In its review of the current trends, the Council noted evidence of continued buoyancy in the economy, with the bank's latest projections pointing to a sustained pace of economic activity during the second half of the year.

The Council, however, observed that, against a backdrop of rising global prices of key commodities, it was important to ensure that domestic market structures do not accentuate external price pressures.

In this regard, the Council emphasised that fostering improvements in productivity would help restrain inflation and safeguard the economy's international competitiveness.

The Monetary Policy Advisory Council is due to meet again on December 28.