Cyprus interest rates remain unchanged, says MPC

The Monetary Policy Committee (MPC) decided Tuesday to maintain the official interest rates of the Central Bank of Cyprus, that is the minimum bid rate on the main refinancing operations, the interest rate on the marginal lending facility and the interest rate on the overnight deposit facility, unchanged at 4,50%, 5,00% and 3,00%, respectively.

A Central Bank announcement said that the MPC convened in the light of the recent setting of the conversion rate of the Cyprus pound to the euro on July 10 at €1 = £0,585274, which is the same as the central rate observed in the ERM II.

This opens the way for the adoption of the euro as well as the full monetary and economic convergence with the euro area, the Central Bank said.

Domestic economic developments at this juncture, such as the relatively fast-paced economic growth, mainly underpinned by consumption expenditure and construction, hinder interest rate convergence with the euro area through a reduction in domestic interest rates, the announcement added.

Also supporting the decision on interest rates, are the sizeable credit expansion to the private sector and the concomitant inflationary pressures, the latter reflected in significant price increases of domestic product and services prices included in the CPI, the continuing increase in real estate prices and the widening of the trade deficit.

“Under these circumstances and in light of the fact that the European Central Bank maintained its interest rates unchanged at its recent meeting, the MPC decided unanimously to maintain its waiting mode and keep the official interest rates of the Central Bank of Cyprus unchanged,” the press release concluded.