Cyprus seen keeping rates unchanged

THE CENTRAL Bank of Cyprus’s monetary committee is expected to keep interest rates unchanged at 4.5 per cent at a meeting on Monday, despite accelerating inflation and credit growth, according to analysts.

In less than two months Cyprus will joint the euro area, and the island’s interest rates are currently 50 basis points above European Central Bank rates.
“A reduction at this stage would not contribute towards macroeconomic stability,” Sophronis Eteocleous from Marfin Popular Bank told Reuters.

Etecleous said the central bank would take into account the effect of increased oil and food prices and credit expansion on inflation and real estate prices.
According to official figures, inflation accelerated in October to 3.0 per cent from 2.63 per cent in September. Credit increased by 24.7 per cent year-on-year in September compared to 24.2 per cent in August. In addition, house price tracker BuySell showed a 12.3 per cent price increase in September year-on-year.

“The central bank will wait until the last moment to reduce interest rates. They could instead control credit growth with restrictive measures,” Michalis Kyrou of Bank of Cyprus said. (R)
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