Cyprus refinancing rate unchanged at 3.25%

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The Central Bank of Cyprus kept official interest rates unchanged as expected at its regular Monetary Policy Committee meeting on Friday July 8.

The interest rate on the marginal lending facility remains at 4.25% (compared with 3.00% in the euro-area) and the deposit facility remains at 2.25% (1.00% in the euro-area), while the official rate on main refinancing operations now stands at 3.25% (2.00% in the euro-area).

In a statement the Monetary Policy Committee said that “following an in-depth assessment, the MPC noted that both international and domestic economic developments have not substantially changed since its last meeting on June 9, 2005, so as to dictate a change in domestic interest rates at this juncture.”

“With regard to the international developments, oil prices remain a cause of concern, while the MPC took into serious consideration the wait-and-see stance adopted by the European Central Bank and the Bank of England at their respective meetings yesterday.

“On the domestic front, the MPC also took stock of the encouraging developments recorded in prices, which resulted in the retreat of inflation to 1.7% in June, compared with 2.8% in the same month of 2004. For the first half of the year, inflation reached 2.6% compared with 1.5% registered over the same period of 2004.

“In view of the above, and also taking into account the two recent significant interest rate cuts, the MPC decided to adopt a wait-and-see stance at this juncture, maintaining the official interest rates unchanged.”

Interest rates were cut by 50 basis points on May 20 and again by 50 basis points on June 9, shortly after Cyprus joined the Exchange Rate Mechanism (ERM2) on May 2.