Asia > Southern Asia > Sri Lanka > Sri Lanka's Central Bank Keeps Rates On Hold

Sri Lanka: Sri Lanka's Central Bank Keeps Rates On Hold

2013/03/19

The Central Bank of Sri Lanka on Friday decided to keep its key interest rates unchanged for a third consecutive time. The Monetary Board said inflation is expected to reach additional favorable levels by the end of the year.

The Board retained the repurchase rate at 7.5 % and the reverse repurchase rate at 9.5 %. It was of the view that the current monetary policy stance was "appropriate."

Inflation remained unchanged at 9.8 % in February, reflecting the impact of the substantial changes to administratively determined prices and disruptions to domestic food supplies.

"Inflation has been at single digits over the completed 49 months and the positive outlook for inflation is expected to continue, supported by well contained request and favorable domestic and world supply conditions," the Board said. "Such moderation of inflation is as well expected to offset the upward inflationary pressure of expected revisions to administered prices."

The Board noted that credit extended to the private sector continued to decelerate further recording a increase of 15.5 % in January, indicating that the relaxation of monetary policy in December 2012 is from presently on to be reflected in bank lending.

At the same time, the central bank expressed concern that interest rates pertaining to both deposit and lending interest rates remained still high despite relaxing monetary policy two months ago. However, it expects both rates to be adjusted in line with the direction of monetary policy in the near term, following recent discussions with leading commercial banks.

The central bank anticipates such adjustment to stimulate private sector economic activity towards the increase targets for 2013.

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