Central Bank leaves rates unchanged

The Central Bank of Malta yesterday left the central intervention rate and the discount rate unchanged at four per cent.

The decision was taken by the Governor Michael C. Bonello in terms of article 17A of the Central Bank of Malta Act, following a meeting of the Monetary Policy Advisory Council yesterday morning.

The governor noted that the short-term premium on the Maltese lira increased slightly since the previous meeting, as money market interest rates abroad had fallen faster than domestic rates.

The Central Bank continued to absorb excess liquidity from the banks, thus containing the reduction in interest rates.

Reviewing domestic economic conditions, the council noted that although output increased in the third quarter, underpinned by a rise in net exports, prospects for the economy going into 2003 would depend on international economic conditions, which are widely expected to be characterised by slow growth in Malta's key export markets.

Domestic economic developments were unlikely to generate inflationary pressures in the near term, particularly because private consumption demand was subdued and the underlying weakness in bank lending to the private sector persisted.

While the council welcomed the further consolidation in the fiscal position projected for 2003, it noted that the underlying fiscal stance remained expansionary.

This was likely to have a negative impact on the current account deficit in the balance of payments, which widened during the first three quarters this year.

The Monetary Policy Advisory Council is due to meet again on December 20.