Cyprus central bank leaves interest rates unchanged

But concerned about CPI above 3%

The Monetary Policy Committee of the Central Bank of Cyprus decided to keep interest rates unchanged on Friday.

The interest rate on the marginal lending facility remains at 4.25%, compared with 3.50% equivalent in the euro area.

The minimum bid rate on the main refinancing operations stays at 3.25%, compared with 2.50% in the eurozone.

The interest rate on the deposit facilityremains at 2.25%, compared with 1.50% in the eurozone.

The Committee did, however, raise concerns about the rate of inflation: consumer price inflation (CPI) reached 3.23% in March compared to 2.64% in February and 2.25% in January 2006.

It also said that it considered carefully significant growth in the money supply as well as increased bank credit to the private sector.

The MPC noted that economic growth is satisfactory (3.8% in 2005) and that after a short lapse there was an inflow of foreign exchange again.

The MPC said that efforts for further fiscal discipline should continue based on structural reform measures (the budget deficit was cut to 2.4% of GDP in 2005).

The MPC also took into account the European Central Bank’s monetary policy decision on Thursday, when it maintained euro rates unchanged at 2.5%.