At today’s unscheduled meeting of the Monetary Policy Committee, 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, are decreased by 0,50 percentage points to 4,25% and 2,25%, respectively.
During its meeting, the MPC assessed the extent of the reported foreign currency inflows and the consequent appreciation of the Cyprus pound against the euro. The increase in inflows reflects the enhanced confidence in the pound post-ERM II entry. In particular, from 1 May 2005 to date the inflows have reached £157 million, compared with £58 million during the same period in 2004. The MPC also took into account the substantial recorded decrease in the yields on government securities during the last auction, as well as the fall in inflation to 2,45% in May, compared with 3,08% in April.
In view of the above, the MPC decided to speed up the convergence between domestic interest rates and those in the euro area, by reducing official interest rates by 0,50 percentage points.