On Friday, at the monthly meeting of the Monetary Policy Advisory Council (MPAC), the Governor of the Central Bank of Malta reduced the central intervention rate by 25 basis points to four per cent with immediate effect in order to come in line with the ECB's minimum bid rate on the main refinancing operations (see www.centralbankmalta.com). This was the last meeting of the MPAC under the current legislation. As from today, the bank will become a member of the Eurosystem which, through the Governing Council of the ECB (comprising the governors of the central banks of all the countries that have adopted the euro) is responsible for the formulation of monetary policy for the entire euro area.
As from that date the bank's Governor will participate in the deliberations of the Governing Council as a full member. At the same time, the bank will become responsible for the implementation in Malta of the ECB's monetary policy stance. Accordingly, with effect from yesterday, the MPAC was dissolved.
On Friday the Central Bank of Malta also conducted the weekly seven-day term deposit auction, absorbing Lm142.3 million from the banking system. This was Lm39.9 million less than the Lm182.2 million that matured on the same day. The interest rate that resulted from the auction was 3.95 per cent, which is the floor of the new interest rate band at which the Bank is currently conducting its term deposit auctions. This absorption operation represented the last monetary operation conducted by the bank under the current legislation. As from this month, the Bank's monetary operations will aim to implement in Malta the ECB's monetary policy stance.
Last Friday's net injection of funds was in response to a decrease in liquidity in the banking system during the week. The main factors behind this were related to government receipts amounting to Lm39.9 million, although purchases of Lm4.6 million worth of foreign currency and Lm4.4 million worth of Malta Government Stocks also contributed. Partly offsetting these factors were direct credits amounting to Lm12.3 million and a Lm12.1 million contraction in currency in circulation.
No interbank deals were reported during the week.
In the primary market for Treasury bills, the Treasury invited tenders for 91-day and 182-day bills maturing on March 28 and June 27 of this year, respectively. Bids for Lm14.2 million and Lm11.2 million for the respective tenors were submitted, but none were accepted by the Treasury. Given that no Treasury bills matured during the week the outstanding balance of bills remained unchanged at Lm152.3 million.
Today the Treasury will invite tenders for 91-day bills maturing on April 4.
Treasury bill trading on the Malta Stock Exchange amounted to Lm20,000, with all transactions being conducted by the bank in its role as market maker. No off-exchange transactions were conducted.