Central Bank leaves rates unchanged

The Central Bank said yesterday it had left the central intervention rate unchanged at 3.75 per cent following the monthly meeting of its Monetary Policy Council.

The decision was taken by the Governor, Michael C. Bonello, after the council noted that the Central Bank's external reserves - the key measure of the sustainability of the exchange rate peg - had increased at a slower pace during the first quarter.

The bank said the medium-term prospects for the balance of payments were clouded by the downside risks for domestic economic growth associated with the expected negative impact of the war in Iraq on Malta's major export markets, which were already characterised by weak demand conditions.

"The governor considered that, although domestic money market rates had fallen as had rates overseas, the support provided to the exchange rate peg by the premium on the Maltese lira at its current level was appropriate given the financial market volatility prevailing abroad and the current climate of uncertainty.

The central intervention rate was last adjusted in December when it was reduced by 25 basis points.

The council meets again on April 24.