Sri Lanka Central Bank maintains policy interest rates, reserve requirement

Nov 16, Colombo: Sri Lanka’s Central Bank has decided to maintain the current policy interest rates and the Statutory Reserve Ratio (SRR), the commercial banks’ deposit requirement following its monthly Monetary Board meeting held Tuesday (15).

In the Monetary Policy Review released Wednesday the Central Bank said its Repurchase rate would remain at 7.00 percent while the Reverse Repurchase rate remains at 8.50 percent. The SRR) applicable to all rupee deposit liabilities of commercial banks will be at 8.00 percent.

The Bank said country’s economy remains positive growing on a high growth trajectory.

The inflation has decreased for the third consecutive month in October 2011 with the year-on-year change in the Colombo Consumers Price Index declining from 6.4 per cent in September to 5.1 per cent in October 2011, the review noted.

The monetary authority expects the inflation to continue to ease during the remainder of 2011 due to the improvements in domestic supply conditions, arising from the high growth momentum of the economy.

The Central Bank however, expects the last month’s fuel price hike and the effect of the higher fuel prices on public and goods transportation could cause a slight increase in prices.

Both earnings from exports and expenditure on imports grew further on a year-on-year basis in September 2011 expanding the trade deficit but the higher earnings from tourism, increased worker remittances as well as other inflows to the services account helped contain the impact of the trade deficit on the current account balance, the Bank noted.

“The rapid expansion of credit obtained by the private sector, which has increased by over Rs.37 billion on average per month in 2011, continued to fuel the growth of money supply,” the Central Bank said in the review.

Considering the recent macroeconomic developments, the Monetary Board has decided that a change in the policy interest rates is not warranted at this time.

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