At today’s meeting of the Monetary Policy Committee (MPC), the following monetary policy decisions were taken:
The 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 5,25% and 3,25%, respectively.
During its meeting, the MPC noted the potential risks in both international and domestic developments, especially those regarding the economic recovery and inflation, stemming from the upward trend in oil prices. Despite these concerns, the MPC’s estimate for economic growth in 2005 is around 4,0%, while domestic inflation is expected to accelerate slightly between 2,5% and 3,0%. Inflation in March was 2,89%, compared with 2,80% and 2,94%, in February and January, respectively. The MPC expressed once more its satisfaction with the substantial reduction in the fiscal deficit, from 6,3% of GDP in 2003 to 4,2% in 2004. However, the MPC stressed that the efforts for fiscal discipline and consolidation should continue at the same pace in order to achieve the goals set out in the Convergence Programme, which was submitted to the European Union.
In view of the above, the MPC decided to adopt a wait-and-see stance leaving its official interest rates unchanged. The MPC will have the opportunity to evaluate its stance again in the coming months, when more evidence, supporting the current overall positive economic outlook, will be available.