Monetary Policy Decisions

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, that is the interest rates on the marginal lending facility and the deposit facility, remain unchanged at 4,50% and 2,50%, respectively.

During its meeting, the MPC noted that domestic and international economic developments have not substantially changed since the previous meeting in November 2003, in order to warrant a change in domestic interest rates. Specifically, the international economic recovery appears to continue gathering momentum in 2004, mainly due to economic growth in the United States. Important developments in the international arena are the significant weakening of the dollar, especially against the euro and sterling, as well as the wait-and-see stance adopted by the main central banks in relation to their monetary policy decisions.

Regarding domestic economic developments, a significantly enlarged fiscal deficit, a current account deficit and subdued economic activity continue to coexist, whereas the noticeable reduction in inflation during December 2003 is attributed to temporary factors. The MPC notes, once more, that the broadening of the fiscal deficit and its effect on inflation as well as on the current account, point to the urgent and immediate need for increased fiscal discipline and consolidation.