Tuesday, August 7, 2012

Sri Lanka holds interest rate steady at 7.75%

    The Central Bank of Sri Lanka held its main repurchase rate steady at 7.75 percent, as forecast, as growth remains on track and inflation is expected to remain around the target.
    The central bank acknowledged that global economic conditions had worsened but the adverse impact was not likely to affect Sri Lanka's economy more than already anticipated earlier this year when 2012 growth forecasts were cut to 7.2 percent from 8.0 percent. The economy expanded by an estimated 8.2 percent in 2011.
    Although interest rates are at their highest level in two years, the central bank said the amount of credit that could be dispersed in the second half could comfortably support growth.
    "In that context, the growth estimates still seem to be within reach, notwithstanding the gloomy global conditions," the central bank said in a statement.

    Sri Lanka's economy expanded by 7.9 percent in the first quarter from the same quarter last year, down from an 8.3 percent growth rate in the fourth quarter.
    The central bank acknowledged there were some short-term inflationary pressures from the impact of adverse weather on food prices, but better domestic supply conditions and recent measures were expected to contain inflation at single digits during the rest of the year.
     The annual inflation rate rose to 9.8 percent in July from 9.3 percent in June, but the central bank said annual average inflation had remained around 6 percent since February.
    Sri Lanka's central bank raised its key rate by 25 basis points in April and by 50 basis points in January. The bank targets an inflation rate of 8 percent.


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