At today’s meeting of the Monetary Policy Committee (MPC), the following monetary policy decisions were taken:
The key official interest rates of the Central Bank of Cyprus, that is the interest rates on the marginal lending facility and the deposit facility, remain unchanged at 5,50% and 3,50%, respectively.
During its meeting, the MPC noted that international and domestic economic developments have not substantially changed since the previous meeting on 3 September 2004, in order to warrant a change in domestic interest rates.
As regards international developments, the price of crude oil continues to be a matter of concern, while a wait-and-see stance was adopted by the major central banks, apart from the Fed, during their recent meetings.
Regarding domestic developments, inflation in September fell to 2,37%, compared with rates above 3% reported in the previous two months, mainly due to the fall in the prices of agricultural products. However, concern about inflationary pressures remains, especially with the effect that prolonged high oil prices might have on the Cost of Living Allowance Index. Regarding other domestic developments, the magnitude of the fiscal deficit continues to be a serious problem, despite its reported improvement in the first half of 2004. The growth rate of GDP, as recorded in the first two quarters of the year, as well as its rise of 3,5% which is forecast for the whole year, is satisfactory.
In view of the above, the MPC decided to adopt a wait-and-see stance leaving its official interest rates unchanged.