business • November 30 2003

Central intervention rate left unchanged

The Central Bank of Malta on Friday left the central intervention rate unchanged at three per cent, following the decision taken by CBM Governor Michael Bonello at this month’s Policy Advisory Council meeting.
The Governor noted that, although the premium on the Maltese lira remained stable, the upward trend in the Central Bank’s external reserves appears to be levelling off, as the October increase was more than offset by a decline going into November. This development is largely attributable to the continuing sluggishness in external demand and its impact on Malta’s export sector. From this perspective, current interest rate levels remain sufficiently supportive of the exchange rate peg. This monetary policy stance is also justified in a domestic economic environment characterised by a low rate of inflation, falling consumption and rising unemployment.
The Governor welcomed the medium-term fiscal consolidation programme announced in the Budget speech and the plans to reach a broad social consensus on welfare reform. Success in this regard is a prerequisite for restraining growth in public expenditure. This should also favour a more efficient allocation of resources and, by containing pressures on the reserves, complement the Bank’s monetary policy strategy.
The Monetary Policy Advisory Council is due to meet again on 29 December.