Central Bank of Cyprus hikes Lombard 25bp, aligns with Euro rates

The Central Bank of Cyprus announced Wednesday the increase of the interest rate on the marginal lending facility (Lombard) and the interest rate on the overnight deposit facility by 25 basis points, to 5% and 3%, respectively.

However, this will not affect the current market interest rates, as the bid rate on the main refinancing operations (repo), at which loans and deposits in Cyprus pounds are priced, remains unchanged at 4,50%.

Following Wednesday’s decision by the European Central Bank (ECB) to raise its interest rates by 25 basis points to 4%, the Monetary Policy Committee of the Central Bank of Cyprus decided to readjust accordingly the interest rate on the marginal lending facility and the interest rate on the overnight deposit facility, so that these remain aligned with the respective ECB rates.
The Central Bank notes in an announcement that its decision for a rate hike was dictated by purely technical reasons and is intended to gradually restore the one percentage point margin which, in accordance with the euro area practices, must exist between the main refinancing operations rate (repo rate) and the other two rates.

The European Central Bank showed its readiness to hike rates again to combat inflationary dangers in a strongly expanding economy.

The increase, which had been widely expected on financial markets, marks a doubling of euro zone rates in 18 months and brings ECB rates to their highest level since September 2001.