Central bank keeps interest rates unchanged.

THE Central Bank yesterday kept interest rates unchanged at its monthly review, saying the economic climate did not warrant an adjustment.

The bank’s kept interest rates at 3.5 per cent for deposits and 5.5 per cent for advances.
“The bank is in waiting mode,” Central Bank governor Christodoulos Christodoulou told reporters.

Economic growth, estimated at 3.2 per cent for the first quarter in the latest official figures available, is satisfactory but the level of the government deficit remained worrying, Christodoulou said.

The high price of crude on international markets had not had an impact on the economy, but could add to inflationary pressures, depending on how long prices stay high, he said.

Fuel is a key component in the consumer price index, the benchmark for a cost of living allowance claimed by unionised workers twice a year.

The last rate adjustment was in April, when the bank unexpectedly raised interest rates by one percentage point to protect the Cyprus pound from a currency flight on the eve of the country’s entry into the European Union.

Central bank statistics suggest that the rate increase stopped an acceleration of currency outflows that began in January.

Since May, there has been uninterrupted net inflow of funds, driving the Cyprus pound 1.64 per cent higher against the euro, Christodoulou said.

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