Central Bank of Cyprus aligns interest rates with Euro ones
Nicosia, Jun 6 – The Central Bank of Cyprus has increased the interest rate on the marginal lending facility and the interest rate on the overnight deposit facility by 25 basis points. This, however, will not affect the current market interest rates, as the bid rate on the main refinancing operations at which loans and deposits in Cyprus pounds are priced remains unchanged.
Following this decision of the European Central Bank (ECB), the Monetary Policy Committee of the Central Bank of Cyprus (CBC) decided to read just accordingly the interest rate on the marginal lending facility and the interest rate of the overnight deposit facility, so that these remain aligned with the respective ECB rates.
Specifically, the interest rates of the CBC are now set as follows:
(1) The bid rate on the main refinancing operations (repo rate) remains unchanged at 4, 508.
(2) The interest rate on the marginal lending facility (Lombard) and the interest rate on the overnight deposit facility both increase by 25 basis points and are now 5, 008 and 3,008, respectively.
The Central Bank also announced that its decision for a rate hike was dictated by purely technical reasons which, in accordance with the euro area practices, must exist between the main refinancing operations rate (repo rate) and the other two rates.
The European Central Bank raised interest rates by 25 basis points to 4% on Wednesday and showed its readiness to hike again to combat inflationary dangers in a strongly expanding economy.
The increase, which had been widely expected on financial markets marks a doubling of euro zone rates in 18 months and brings ECB rates to their highest level since September 2001.