Banks see further economic progress driven by lower interest rates

The Association of the Cyprus Banks (ACB) sees further progress in the economy, driven by the reduction of interest rates in the context of the easing of monetary policy by the European Central Bank (ECB), the ACB’s President Aristides Vourakis has said, noting that ECB rate cuts are being reflected in the lending rates of the Cypriot banking system.

A delegation of the ACB, headed by Vourakis, on 31 October met with the Minister of Finance Makis Keravnos who praised the progress made by the Cypriot banking system and expressed gratitude over the Cypriot bank’s participation in a new government scheme to subsidise interest rates for loans vulnerable homeowners signed up for between 2022 and 2023.

“I have expressed my satisfaction over the situation in the banking system and its high capitalisation,” Keravnos said in statements following the meeting.

On his part, Vourakis said he conveyed to the Minister the Association’s satisfaction over the “outstanding course of the Cypriot economy, as reflected in the capital markets and the credit rating agencies.” He also said he briefed the Minister on the “excellent progress” made by the Cypriot banks in the last 18 months.

“We expect systemically good progress in the economy, driven by the immediate and estimated reduction of interest rates on a European level,” he said.

Replying to a question over the transmission of the last rate cut by the ECB to the Cypriot banking system, Vourakis said the reduction of the ECB base rates already began to take effect in lending rates in Cyprus.

So far the ECB has reduced its basic rates by 0.75% in three rate cuts, with experts projecting further cuts driven by the lower inflation rate in the Euro area.

“Further reductions are expected in the next six to eight months which will be transmitted to the customers,” Vourakis added.

(Source: CNA)