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 4,25% and 2,25%, respectively.
During its meeting, the MPC noted that both international and domestic economic developments have not substantially changed since its last meeting on 2 September 2005 so as to warrant a change in domestic interest rates. Continuous high oil prices have influenced in a downward direction global economic growth projections for 2005 and 2006, whereas the upside risk of inflationary pressures has risen. With regard to domestic developments, the MPC took into serious consideration the acceleration in inflation to 2,94% in September, compared with 2,11% in August and 1,91% in July. For the first nine months of 2005, inflation reached 2,54% compared with 1,96% over the same period of 2004. The MPC also took into account the satisfactory growth in economic activity and bank credit. At the same time, the MPC expressed its deep concern about the large foreign currency inflows, partly due to seasonal factors, as well as the continuous high exchange rate of the Cyprus pound against the euro.
In view of the above and the wait-and-see stance adopted by the European Central Bank, the MPC decided, by a majority vote, to leave official interest rates unchanged.