Addressing Interest Rate Disparity in Cyprus
In a recent meeting with Finance Minister Makis Keravnos, Christodoulos Patsalides, the newly appointed governor of the Central Bank of Cyprus (CBC), expressed concerns over the interest rate disparity between lending and deposit rates in the country. Patsalides, who has previously served as an advisor to the president, emphasized the need for measures to bridge this gap for the benefit of the Cypriot economy.
The discussion with Keravnos was described as comprehensive, covering the economy and financial stability, with an eye on further collaboration amidst significant geopolitical developments. Keravnos affirmed the commitment to continuous and close cooperation with Patsalides for the common good of the nation’s economy.
Patsalides commended Cyprus’ economic resilience and its ability to weather crises but warned against becoming complacent in the face of ongoing challenges. He underscored that the CBC’s primary concern is to maintain financial stability and contribute effectively to this objective.
Regarding the European Central Bank’s (ECB) official interest rates, Patsalides believes they are set at an appropriate level to achieve the 2 percent inflation target in the medium term. He acknowledged uncertainties in the Middle East that could impact economic outcomes and stressed the importance of narrowing the gap between lending and deposit rates in Cyprus.
The governor also highlighted his desire to enhance the transparency and accountability of the CBC. This includes improving access to information, ensuring effective operation of administrative and executive boards, strengthening internal control mechanisms, and establishing committees and departments. These steps are aimed at aligning the governance standards of the CBC with those of other European banks.
When questioned about potential interest rate changes in June, Patsalides reiterated his stance that current levels are suitable. He noted that the ECB would have more data by June to inform its position on future interest rate trajectories, maintaining flexibility based on economic indicators at that time.
Finance Minister Keravnos echoed Patsalides’ sentiments, indicating a shared vision between the Ministry and the CBC on addressing economic issues, including the
