Robust activity in the second quarter of 2004 has raised output growth to 8.0%, the highest quarterly growth since the third quarter of 2000. The main impetus to growth emanated from stronger private sector expenditure and sustained high growth in external demand.

Notwithstanding the stronger aggregate demand and higher global energy prices, the domestic inflation rate, as measured by the Consumer Price Index, remained low at 1.2% in the second quarter. The underlying inflation in the economy is expected to remain low. On the supply side, producers have also responded with new investments and capacity expansion in key sectors of the economy. Competition and stable conditions in the labour market, as well as productivity improvements have also contributed to the low inflation. Under these circumstances, the current stance of monetary policy will be maintained to support growth. The overnight policy rate will therefore remain unchanged at 2.70%.