Central Bank governor calls for removal of rigidities in labour market

The Central Bank of Malta yesterday again left the central intervention rate unchanged at three per cent.

The governor noted that with the bank's external reserves position remaining stable and a slight increase in the premium on the Maltese lira, official interest rate levels currently provide sufficient support to the exchange rate peg.

Looking ahead, the governor considered that pressures on the reserves were unlikely to build up, as indicators from money and credit aggregates and the labour market continued to point to subdued domestic demand.

Retail prices also remained stable in February, indicating that there was no strong underlying inflationary pressures.

On the other hand, while there were signs of recovery in Malta's export markets, the benefits could only be fully reaped if the structural weaknesses in the economy were addressed.

In this context, the governor stressed the importance of removing rigidities in the labour market, such as skills mismatches that raised costs and adversely affected competitiveness; and of reducing the fiscal deficit, as this would lead to a more efficient allocation of resources and support the bank's monetary policy strategy.

The monetary policy advisory council is due to meet again on April 29.