The report reviews the bank’s policies and operations during the year and includes detailed financial statements. It starts with a statement by the governor, which is then followed by an analysis of economic and financial developments in Malta and abroad. The report also carries a box on the bank’s estimate of household disposable income.
In his statement governor Josef Bonnici notes that even though inflation in the euro area stands below the European Central Bank’s objective of less than but close to two per cent, there is no sign of deflation. Recent price changes have been positive in all but three countries, meaning that price falls are not widespread. Moreover, price declines were only registered in a small proportion of the components of the HICP basket. Furthermore, there are no signs that low inflation is self-fulfilling, as long-term inflation expectations remain well anchored.
In order to address economic imbalances and to implement structural reforms, various euro area countries have seen lower nominal wages. Unit labour costs in these countries have decelerated and have now moved closer to those...read on.
