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 of 27 February 2004, in order to warrant a change in domestic interest rates. Specifically, the international economic scene appears to remain relatively unaffected by the March terrorist attacks in Madrid with the largest economies continuing their growth path. The MPC also took into account the fact that in their most recent meetings the US Federal Reserve, the European Central Bank and the Bank of England decided to keep their official interest rates unchanged.
Regarding domestic economic developments, a significantly enlarged fiscal deficit and subdued economic activity continue to coexist. The latter is confirmed by several economic indicators, such as the fall in tourist arrivals in the first two months of 2004 and the low growth in money supply and bank credit. A noticeable development in March was the further reduction of inflation to 0,41% from 1,86% recorded in the previous month, while for the 1st quarter of 2004 inflation was 1,35% compared with 4,84% for the same period in 2003. In view of the above, the MPC decided to adopt a wait-and-see stance leaving its official interest rates unchanged.