Comments by Haris Achniotis, member of the Monetary Policy Committee of the CB.

The Ministry of Finance is in favour of interest rate cuts. “Its time for the Central Bank to proceed to interest rate cuts” said an official source of the Ministry of Finance to Stockwatch, pointing out that the external environment and the developments in macroeconomics have led to this act, together with Fed’s decision yesterday to cut American rates to 1.25% and the European Central Bank’s decision to be taken shortly, concerning euro zone rate cuts (3.25%).

According to the same source, a possible rate cut in Cyprus would probably lead to an economy and market refreshment, as international and domestic macroeconomic conditions are not really an obstacle. Moreover, the Central Bank should cease referring to the economic stability and the so-called negative international external environment, since within a three-month period Fed has lowered rates 17 times, while ECB has proceeded to this act 5 times.

“Besides, if ECB decides to trim interest rates, the difference between Cyprus prime rates and euro zone rates will become even larger. The need for convergence, therefore, will become even more acute”, said the same source.

When CB’s head official and MPC member, Haris Achniotis, was asked by “SW” in what extent latest developments – Fed and ECB – affect the basis on which CB’s decision on 4/11 to leave prime rates unchanged was based, he avoided the question.

Mr. Achniotis mentioned that the Central Bank keeps apace with the latest monetary developments overseas and the Monetary Policy Committee has taken into consideration these developments, as well as domestic macroeconomics indicators, such as inflation and growth rate.

Mr. Achniotis, however, avoided commenting on other Board members views - who are in favour of a rate cut - reminding IMF’s recent report over Cyprus economy.