Cyprus interest rates kept 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 4,50%, 5,00% and 3,00%, respectively.

Following an extensive discussion, the MPC noted that domestic developments have not substantially changed since its last meeting on 17 July 2007, so as to warrant a change in domestic interest rates at this juncture. More specifically, inflation registered a small acceleration to 2,47% in August, from the previous reading of 2,43% in July. For the eight-month period covering January – August, inflation reached 1,91% compared with 2,95% in the corresponding period of 2006. Inflationary pressures continue to be fuelled by high prices of oil and certain food items as well as by the fast expansion registered by money supply and credit to the private sector. A major cause of concern is the distribution of these loans, which are primarily channelled to the construction sector as well as to consumption, thereby contributing to the continuing increase in real estate prices and the noticeable widening of the trade deficit.

The MPC, taking into account all the above, as well as the fact that the European Central Bank maintained its interest rates unchanged at its recent meeting, decided, unanimously, to maintain its waiting mode and keep the official interest rates of the Central Bank of Cyprus unchanged.