No change in central intervention rate

The Central Bank of Malta yesterday left the central intervention rate unchanged at 3.75 per cent.

The intervention rate is the rate at which the Central Bank intervenes in the interbank market to manage day-to-day liquidity.

In the absence of the governor, the decision was taken by Deputy Governor David Pullicino, in terms of the Central Bank of Malta Act, following the Monetary Policy Advisory Council meeting held this morning.

The deputy governor considered that this decision was compatible with the maintenance of the exchange rate peg in the current circumstances.

The council noted that the Central Bank's external reserves decreased in March as the trend of expansion slowed down, but recovered partly in April.

The premium on the Maltese lira narrowed marginally as downward pressure on domestic interest rates persisted, while market rates abroad edged up.

Domestic demand appears to have remained subdued and information available on the balance of payments during the first quarter of 2003 indicates that export performance has weakened under the impact of the war in Iraq and adverse demand conditions in Malta's major export markets.

However, given the dissipation of the uncertainty that had characterised recent months, some improvement in the domestic economic environment may be expected.

This notwithstanding, the council stressed the importance of continued fiscal consolidation in support of the bank's monetary policy strategy.

The council is due to meet again on May 27.