Wednesday, March 14, 2012

Central Bank of Sri Lanka Holds Repo Rate at 7.50%

The Central Bank of Sri Lanka held its benchmark repurchase rate unchanged at 7.50%, and reverse repurchase rate at 9.00%, and kept the Statutory Reserve Ratio at 8%.  The Bank said: "recent policy measures are expected to lead to a moderation of aggregate demand which will have a dampening effect on prices, thereby offsetting to some extent, the supply side pressures on prices as a result of the recent upward adjustments to administered prices. As a consequence, the Central Bank expects inflation in 2012 to remain subdued at mid-single digit levels. The Central Bank also expects the recent policy measures to decelerate broad money growth during the course of 2012 towards the targeted levels, thereby further easing future inflationary pressures."

Sri Lanka's central bank previously hiked rates by 50 basis points at its February meeting this year, meanwhile 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 124 against the US dollar. 


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