Friday, February 3, 2012

Central Bank of Sri Lanka Hikes Rate 50bps to 7.50%

The Central Bank of Sri Lanka raised its benchmark repurchase rate by 50 basis points to 7.50% from 7.00%, and reverse repurchase rate to 9.00% from 8.50%, and kept the Statutory Reserve Ratio at 8%.  The Bank said: "Taking into consideration these macroeconomic developments,  the Monetary Board of the Central Bank of Sri Lanka is of the view that the continuous increase in credit extended to the private sector by commercial banks needs to be addressed for two main reasons: First, to  curtail import related credit, thereby reducing the trade deficit and the current account deficit, and second, to effectively ensure that inflation remains at the mid-single digit levels in the second half of 2012 as well, notwithstanding the sharp build up of credit in 2011."

Sri Lanka's central bank previously kept its monetary policy settings unchanged at its January meeting this year, while the Bank last cut its key interest rates in January last year.  Sri Lanka reported an annual headline inflation rate of 3.8% in January, 4.9% in December, and 4.7% in November, down from 6.4% in September, 7% in August, 7.5% in July, 7.1% in June, and 8.2% in May.  

Sri Lanka had targeted 8.5% GDP growth in 2011, after its economy expanded 8% in 2010.  Sri Lanka reported 8.2% annual GDP growth in the second quarter (7.9% in Q1).  
The Sri Lankan Rupee (LKR) last traded around 114 against the US dollar. 


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