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Central Bank decides to maintain policy interest rates unchanged

Mar 8, 2011 4:26:47 AM - itnnews.lk

The Central Bank has decided to maintain the policy interest rates unchanged despite the rise in inflation during the month of February.

In the Monetary Policy Review released today, following the yesterday’s Monetary Board meeting, the Central Bank said the current Repurchase rate and the Reverse Repurchase rate would remain at 7.00 percent and 8.50 percent, respectively. Annual average inflation increased marginally from 6.0 percent in January to 6.1 percent in February. The inflation remained between 5-7 percent during the period since July 2010. The Central Bank attributed the rise in inflation to the increase in prices of food items, especially vegetables, due to the shortage of supplies caused by the recent floods in major food producing areas. The Bank expects the supplies to improve and the prices to go down by the end of April and May.

The Central Bank anticipates the impact on rice prices to remain low during the year with stocks being released to the market and the higher output in the Yala season from the increase in the extent of cultivation. The Bank also said the gross official reserves continue to remain high above US$ 6 billion and the rupee has appreciated marginally against the US dollar during the year. Considering these developments, the Monetary Board has decided to keep the interest rates steady, the Bank said.