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, for the moment, the recorded rise in the price of crude oil is not expected to have a strong impact on the world economy. However, in most of the major economies, the reported decline in consumer confidence has resulted in a slightly downward revision of the expected growth rates and a fall in the main stock exchange indices, whereas inflationary pressures, at least in the euro area, have gathered momentum.
The effect of the rise in the price of crude oil on the macroeconomic indicators of the Cyprus economy, have so far been limited. However, concern still exists over possible prolonged high oil prices, due to the relatively large dependence of the Cyprus economy on crude oil, as well as the effect on the Cost of Living Allowance index which would exacerbate inflationary pressures.
During the last two months, domestic inflation was above 3%, reaching 3,3% in July and 3,2% in August. Regarding other domestic economic developments, the magnitude of the fiscal deficit continues to be a serious problem, whereas the growth rate of the economy is satisfactory. The MPC also took into account the fact that the largest part of bank credit was directed towards the building and construction sector.
In view of the above, the MPC decided to adopt a wait-and-see stance leaving its official interest rates unchanged.