Cyprus ECB rate parity seen mid-07

LONDON (Reuters) – Cyprus will align its interest rates with the European Central Bank by June or July of next year in order to meet its eurozone entry date of January 1, 2008, the country’s central bank governor told Reuters yesterday. Interest rates in the new European Union member have been raised to 4.5 percent, a premium of 1.25 percent over the eurozone rate. «I foresee that in June-July next year we will be in a position to have identical interest rates with the eurozone. Even if there is a difference it will be a very small one,» Christodoulos Christodoulou told Reuters on the sidelines of a Commonwealth Business Council investment summit. «If we have to bring down the rates we will, but we are closely following the interest rate decisions of the ECB. Judging by the situation that prevails now… I’m confident we’ll be in a position to align all real and nominal criteria with the eurozone,» he said, adding the economy would be able to afford interest rates at current levels or even lower. «We can easily delete the difference by the time we join the euro, which we think will be January 1, 2008,» by a combination of both Cypriot rate cuts and ECB rate rises, he said. Christodoulou said inflation would not be a problem for Cyprus.