Monetary policy council lowers reserve requirement ratio by 1%

At its meeting of the 27 eptember 2001 the Monetary Policy Council lowered the reserve requirement ratio by one percentage point from 5% to 4% of the banks' deposit liabilities. The new ratio will come into effect from the beginning of the maintenance period that commences on 15th October 2001. This implies an increase in the volume of liquidity available to the banks and thus represents a further easing of the Bank's monetary policy stance, following the cut in the central intervention rate and the discount rate by 25 basis points announced on 31st August 2001.

The Council arrived at this decision after analysing recent international and domestic economic and financial developments within the context of the objectives of the Central Bank's monetary policy.

Reviewing international developments, the Council was concerned about the mounting evidence of a global recession and its likely impact on the Maltese economy. Moreover, monetary conditions overseas have eased further, as major central banks reduced official interest rates and provided liquidity to the financial markets in the wake of the recent terrorist attacks.

The Council considered that local economic conditions were also compatible with a further relaxation of the monetary policy stance. In particular, the official external reserves have continued to stabilise and pressures on the balance of payments have eased further, while demand remains sluggish and output growth relatively weak.