The Central Bank of Malta left the central intervention rate unchanged yesterday, at 4.25 per cent.

The monetary policy advisory council meeting considered that there had been no developments since the previous meeting to justify a change in the bank’s monetary policy stance. The bank’s external reserves recovered moderately in August, reflecting seasonal inflows and the receipt of privatisation proceeds. Domestic financial markets were unaffected by uncertainty in market conditions abroad, with the bank continuing to absorb excess liquidity in its weekly money market operations. Both short-term and long-term interest rate differentials in favour of the Maltese lira remained stable.

While currency in circulation fell further in July, Maltese lira deposits expanded strongly. The latter also highlighted the relative attractiveness of domestic assets and indicated continued confidence in the exchange rate peg following the setting of the permanent conversion rate for the Maltese lira against the euro early in July.

The council noted that the latest indicators pointed to a continued positive perform-ance of the Maltese economy. Inflation had decreased slightly, while labour market conditions were stable. On the external front, the merchandise trade gap narrowed again in June and activity in the tourism industry gathered pace. The fiscal position during the first half of the year was broadly stable.

The monetary policy advisory council is due to meet again on 27 September.