Interest rates in Cyprus have unexpectedly fallen by 1.25% since February 2005. Consequently lower borrowing is expected to lead to a further increase in buyer activity.

The Cyprus pound entered the Exchange Rate Mechanism (ERM2) in May 2005, along with Malta and Latvia (see Latvia article in forthcoming issue of PIN).

In a joint statement by Central Bank Governor Christodoulos Christodoulou and Finance Minister Makis Keravnos said: It is with great pleasure that we announce that the strategic goal to join the Exchange Rate Mechanism II has been achieved."

Within the ERM2, the Cypriot pound will officially be allowed to fluctuate 15% either side of this rate. In order to qualify for the euro, the Cyprus pound must trade for at least two years within ERM without devaluing and meet the other four Maastricht criteria on the fiscal deficit, debt, inflation and interest rates.