25 June 2003

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Official interest rates lowered for second month running

By David Lindsay

The Central Bank of Malta yesterday lowered the central intervention rate by 25 basis points to 3.25 per cent, a reduction equal to last month’s rate cut.
The decision was taken by Central Bank Governor Michael C Bonello at the end of the Monetary Policy Advisory Council meeting held this morning.
Supporting the decision to lower official interest rates again were, in particular, the favourable short-term outlook for inflation, the high level of liquidity in the financial system and an economic growth rate that was likely to remain below potential.
The Governor also cited that recent developments in relevant indicators had rendered a further cut in the central intervention rate compatible with the maintenance of the exchange rate peg. The Central Bank’s external reserves expanded in May and remained stable going into June.
At the same time the international economic environment continued to show signs of weakness, leading once again to downward revisions in growth forecasts and to lower official and market interest rates abroad.
Consequently, and despite the 25 basis point reduction in the Bank’s central intervention rate in May, the interest rate differential in favour of the Maltese lira remained at a level that appeared high under the circumstances.
The Monetary Policy Advisory Council is due to meet again on 25 July.

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Editor: Saviour Balzan
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