Currency in circulation declined by Lm3.7 million, or 0.8 per cent in March, the Central Bank said. The extended downward trend in this area, observed in recent months, continued to indicate that the personal sector was either placing currency in Maltese lira bank deposits or prematurely converting cash holdings into financial assets denominated in euros.

Broad money expanded by Lm40.6 million, or 1.3 per cent, in March. As a result, its annual growth rate accelerated to 7.2 per cent, from 5.2 per cent in February. Monetary expansion during the month was driven by higher domestic credit, but was dampened by a decrease in the net foreign assets of the banking system.

Narrow money contracted by 1.6 per cent in the year to March, as against a drop of 1.7 per cent during the 12 months to February. Over the month, narrow money fell by Lm9.8 million, or 0.6 per cent, as deposits withdrawable on demand fell by Lm6.1 million, or 0.5 per cent, reversing the previous month’s increase.

This was due to a drop in foreign currency deposits, belonging mostly to households and private non-financial companies, as Maltese lira denominated deposits continued to rise.

The net foreign assets of the banking system fell by Lm3.7 million, or 0.2 per cent, in March after having increased considerably in February. Nevertheless, their annual growth rate accelerated to 16.0 per cent.

The month-on-month drop reflected a contraction in the Central Bank of Malta’s net holdings of Lm21.9 million, or 2.4 per cent. In contrast, the net foreign assets of the rest of the banking system increased by Lm18.2 million, or 1.6 per cent, reflecting purchases of foreign currency from the Bank and a rise in revaluation reserves.

Further economic and monetary information can be obtained from the website of the Central Bank of Malta www.centralbankmalta.com