This follows last week's announcement by the Central Statistics Office(CSO) that the annual inflation rate for November fell to 5 percent from 6.9 percent in October. In a statement, the BoB said the current state of the economy and the assumptions on both the domestic and external economic outlook, as well as the inflation forecast, suggest that maintaining a loosening bias is consistent with the achievement of the bank's 3 - 6 percent inflation objective over the medium term. "Accordingly, the Bank has reduced the Bank Rate by one percent to 10 percent ."The Bank expects commercial banks to effect a symmetrical adjustment to the deposit and lending interest rates.
In that regard, the banks should ensure that savers generally earn real positive returns on their savings," the BoB statement says. The central bank added that it is, nevertheless, anticipated that both the domestic and world output growth will be below trend with low inflationary pressures. The decline in inflation occurred in the context of benign external price pressures, sluggish domestic economic activity, as well as the influence of previously restrictive monetary policy. BoB further said that is estimated that in the second quarter of 2009, output was 1.3 percent higher than for the same period last year. In the circumstances, it is expected that demand pressures on inflation will be low in the medium term. In addition, excess industrial capacity, lower commodity prices compared to the previous year, as well as the weak labour market conditions, also imply sustenance of low rates of price increase globally.
