Cyprus Central Bank leaves rates unchanged

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 remain unchanged at 3.25%, 4.25% and 2.25%, respectively.

At a meeting Friday and following extensive discussions, the Monetary Policy Committee (MPC) noted that international and domestic developments have not substantially changed since its last meeting on 19 May 2006 so as to warrant a change in domestic interest rates at this juncture.

With regard to international developments, the MPC took into consideration the wait-and-see stance adopted by the European Central Bank and the Bank of England at their respective meetings Thursday, Central Bank of Cyprus Governor Christodoulos Christodoulou said after the MPC meeting.

Christodoulou said that on the domestic front, the MPC noted that inflation declined slightly to 3.02% in June from 3.13% in May, while for the first half of the year, inflation reached 2.88% compared with 2.64% in the first half of 2005.

Notwithstanding the relatively favourable development on the inflation front in June, underlying inflationary pressures persist, fuelled by high oil prices and the notable expansion registered by money supply and credit to the private sector.

As regards bank loans, the MPC, once again, wishes to emphasise to borrowers the interest rate and exchange risk inherent in foreign currency borrowing.

Thus, the MPC unanimously decided to adopt at this juncture a wait-and-see stance, leaving official interest rates unchanged.