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Central Bank seen holding rates, SRR steady

Sep 15, 2011 4:23:34 PM - www.ft.lk

Central Bank is likely to hold rates and keep Statutory Reserve Requirements (SRR) steady according to analysts polled by Reuters.
The September monetary policy rate decision is due today.

Reuters said the Central Bank is expected to keep its repurchase and reverse repurchase rate steady at 7.00 percent and 8.50 percent respectively for an eighth straight month, both at six-year lows, according to all 15 analysts polled. Thirteen of the 15 expect the central bank to keep the Statutory Reserve Ratio (SRR) for commercial banks unchanged at 8 percent.
The central bank in August said it may gradually reduce policy rates over the medium to long term to spur post-war economic growth. The island nation is targeting growth of at least 8 percent next year as it aims to trim its budget deficit to a 20-year low under terms of a $2.6 billion International Monetary Fund loan programme.
The annual inflation rate eased to 7.0 percent in August, a seven-month low due to slowing global prices of commodities like oil and an expanding local vegetable supply. The central bank last month said annual and annual average inflation should settle to around 6 percent by the year's end, on a new index, despite demand pressure caused by resurgent growth.
If the central bank allows the rupee to appreciate further to curb imported inflation. , ,
Stocks markets may be unaffected if the central bank holds rates, although an unexpected cut could give a boost.
The high level of liquidity, nearly 23.4 billion Sri Lanka rupees ($212.5 million), would enable banks to lend cheaply, which could also result in lower yields in the long run if rates and the reserve ratio stay on hold, dealers said.
Currency dealers say the policy rate decision will have no impact on the exchange rate given the central bank's management of it via a narrow dollar trading band.
Following are the poll's forecasts for where rates will be after Friday's announcement:

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