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The official currency in Malta is the Euro (EUR). The European Central Bank (ECB) is responsible for monetary policy, and it is an autonomous institution.
The Euro-zone has never imposed exchange controls since the introduction of the euro. There are no restrictions as to the holding of foreign currency in Malta, and Maltese residents can hold foreign currency investments.
Exchange rate regime
The Euro follows a purely freely floating exchange rate regime. There is no official exchange rate target. The ECB may sometimes intervene in foreign exchange markets, but such interventions are very hard, if not impossible, to predict.
The Euro challenges the US dollar as a world currency. Many other currencies are pegged or somewhat connected to the Euro. These include notably Denmark, Morocco, most Eastern European countries, and most French-speaking Sub-Saharan countries.
As per article 127(1) of the Treaty on the Functioning of the European Union (TFEU), the ECB’s primary mandate is to maintain price stability. Without prejudice to this objective, the ECB must also support the EU’s general economic policies.
Inflation-targeting lies at the heart of the ECB’s commitment to price stability. The ECB targets an inflation rate below but close to 2%, where the relevant inflation rate is the Euro-zone Harmonised Index of Consumer Prices (HICP).
So far, the ECB has successfully kept inflation in check while adopting an ultra-dovish monetary policy aimed at supporting growth. Average inflation since 1999 has been exactly at 2%. In 2013, the ECB has held fire and allowed inflation to dip to 0.7%. In June 2013, the ECB has said that its inflation expectations are 1.3% for 2013 and 1.4% for 2014.
Dovish monetary policy is in line with the current international trend. As a result, the Euro exchange rate is not necessarily affected, especially if you come from another country with a dovish monetary policy. You might wish to check how the ECB’s policy interacts with that of your home country, as well as how the markets price this.
Generally, dovish monetary policy comes along with ultra-low interest rates. These may even fall below inflation, thereby creating a negative real interest rate, which is very bad for savers. See Investment for Expats in Malta.
On the other hand, if the ECB ever decides to tighten monetary policy (e.g. because of high inflation), interest rates would rise, liquidity would dry up, and securities prices should go down.
Sections in FINANCIAL CONSIDERATIONS IN MALTA:
» Money Transfers for Expats in Malta
» Foreign Exchange for Expats in Malta
» Banking for Expats in Malta
» Pensions for Expats in Malta
» Investment for Expats in Malta
» Wealth Management for Expats in Malta
» Property Investment for Expats in Malta
» Insurance for Expats in Malta
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If you are considering moving to Malta or are soon to depart, you can find helpful information and advice in the Expat Briefing dedicated Malta section including; details of immigration and visas, Maltese forums, Maltese event listings and service providers in Malta.
From your safety to shopping, living in Malta can yield great benefits as well as occasional drawbacks. Find your feet and stay abreast of the latest developments affecting expats in Malta with relevant news and up-to-date information.
Working in Malta can be rewarding as well as stressful, if you don't plan ahead and fulfill any legal requirements. Find out about visas and passports, owning and operating a company in Malta, and general Maltese culture of the labour market.
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